Taxes for Canadian Businesses in the USA – Utah

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Question:
What state taxes does a Canadian business pay in Utah?

Answer:
Sales Tax
Utah’s statewide sales tax rate is 4.85%. Depending on local municipalities, the total tax rate can be as high as 9.05%.

Use Tax
Utah’s statewide use tax rate is 4.85%.

Unemployment Tax
(Payroll Tax)
If you have employees working in Utah, you must pay unemployment taxes on their gross wages up to the taxable wage base ($36,600 as of 2020). Utah’s unemployment tax rates for new employers vary by industry category and range from 1% to 7.1%.

Withholding (Payroll Tax)
If you have an employee earning an income while in Utah you must withhold a certain percentage of their income from each payroll. The amount of tax you withhold from an employee depends on the length of your pay period, the employee’s gross pay and the number of withholding allowances/ exemptions claimed on the employee’s W-4.

Franchise Tax (Income Tax)
Business activity in Utah is typically subject to Utah’s 4.66% franchise tax on net income. There is a minimum franchise tax of $100.

Discussion:
If you remain under certain thresholds in this state you are not responsible for
taxes.

Tax Threshold
Sales $100,000
or 200 transactions
Use $100,000

Franchise Tax (Income Tax)
Use taxes are often treated as income taxes by the Canadian government when calculating income in Canada and applying for foreign tax credits. Meaning if you pay use tax in the USA but have no net profit, you will not benefit from a tax credit theoretically. The actual application is a bit more
complex.

Income taxes in the USA are almost always treated as income taxes by the Canadian government. Thus, in the majority of cases, if you pay tax in the state you don’t pay tax again in Canada unless the Canadian rate is
higher.

Grant Gilmour, BSc (Hons), MBA, CPA, CA, CICA – ITC
Partner, Gilmour Group CPA’s
Email: faqs@gilmour.ca