How to File LLC Taxes in Missouri? (The Ultimate Guide)
After starting an LLC, one of the state requirements for maintaining its compliance is filing taxes with the Missouri Revenue Department.
To help you understand the filing, we solicited legal advice from our certified Venture Smarter team of LLC lawyers and accountants, who have been in the sector for more than seven years.
We spent three weeks reviewing different official tax websites, and here's a detailed guide on LLC taxes in Missouri.
Quick Summary
- To file LLC taxes in Missouri, you must understand the business structure and then submit the correct tax paperwork to the relevant authorities.
- The Missouri Department of Revenue levies industry taxes on companies that operate in certain sectors, like the tobacco or alcohol industry.
- All corporations and LLCs taxed as C-Corps must pay a 4% corporate income tax.
- Drawing from personal experience, you must pay corporate and state income taxes if you decide to tax your LLC as a C-Corp in Missouri.
How Are LLCs Taxed in Missouri?
LLCs are taxed in Missouri as pass-through entities based on the number of members.
A single-member LLC is taxed like a sole proprietorship, while a multi-member LLC is regarded as a partnership for taxation purposes.
As a pass-through entity, a limited liability company (LLC) isn't liable for paying entity-level taxes; all income flows to the members who'll pay state income tax on their returns.
Drawing from our practical experience, the Missouri Revenue Department also accepts C or S Corp tax selection status for active LLCs.
State Taxes for Missouri LLCs
At Venture Smarter, we outline the different LLC structures and their state taxes as follows:
1. Single-Member LLCs
A single-member LLC has one owner or shareholder and is a disregarded entity for taxation because the state views the LLC and the owner as the same.
As a result, the entity doesn't pay income taxes.
However, depending on the LLC's taxable income level, the owner must pay Missouri state income tax at 4.95%.
While single-member LLCs are considered disregarded entities, if their annual income exceeds $8,968, the applicable Missouri state income tax rate would be 5.3% plus a fixed amount of $291 [1].
You will also be liable to pay the 15.3% LLC’s tax withholding and federal income taxes on the business's earnings.
2. Multi-Member LLCs
A multi-member LLC has more than one shareholder and is regarded as a partnership for taxation purposes.
A partnership "passes through" any earnings or losses to its partners but does not pay Missouri taxes on its revenue.
Partnerships must file an information return with the Internal Revenue Service (IRS) to record their revenue, profits, losses, deductions, and credits.
As partners in our multi-member LLC, we also list partnership items on our tax returns and other information reports.
3. LLCs Taxed as S-corp
An LLC with an S-corp election enjoys pass-through taxation and may result in tax savings for your members.
Under default status, the self-employment tax rate of 15.3% is applied to all LLC income.
A member of an S-corp is further taxed at 15.3%, but only on salaries; profits or dividends paid to members are exempt from the self-employment tax.
4. LLCs Taxed as C-corp
Drawing from experience, you must pay corporate and state income taxes if you decide to tax your LLC as a C-Corp in Missouri.
The C-corp pays its shareholders dividends, representing a fraction of its earnings.
Dividends given to shareholders are subject to two taxes:
- The U.S. Corporation Income Tax Return on Form 1120, as profit at the corporate level [2].
- The shareholder's U.S. Individual Income Tax Return as stock dividends on Form 1040 is submitted at the individual level [3].
The corporate tax that Missouri C-Corps must pay is 4%, but according to the state, the rate will reduce to 3.75% starting with the 2024 calendar year.
Federal Taxes for Missouri LLCs
An LLC has to file its taxes in Missouri and pay them to the federal government. The federal taxes include the following:
Self-Employment Taxes
As business owners who receive wages or salary from our LLCs we always pay a self-employment tax of 15.3% that covers Social Security, Medicare, and other benefits.
Other Taxes
Other taxes that Missouri LLCs may pay include the following:
1. Sales and Use Tax
If your Missouri limited liability company sells tangible items, you must apply for a sales tax license and pay sales tax at 4.225%.
In our case, the sales tax that we pay is applied to purchases of physical goods or taxable services made at retail.
In Missouri, the sales tax is distributed and is used to fund these four different government areas:
- General Revenue 3.0%
- Conservation 0.125%
- Education 1.0%
- Parks/Soils 0.10%
However, local jurisdictions can add their own sales taxes, with the maximum local rate reaching up to 5.763 percent [4].
Consequently, the average combined state and local sales tax rate that an LLC might encounter in Missouri amounts to approximately 8.33 percent.
"The Missouri use tax is assessed on the storage, use, or consumption of personal property."
- Delina Yasmeh, J.D./Tax LL.M, Distinguished Expert in Mergers & Acquisitions
2. State Employer Taxes
You must submit withholding taxes and pay Missouri's two-state employer taxes if you're an employer and have staff.
Workers' Compensation
In Missouri, workers' compensation insurance applies to LLCs with five or more employees.
However, if your entity is in the construction industry, you're exempted from this rule because such an entity needs workers' compensation insurance if they employ one or more people.
Workers' compensation rates normally begin at $1.11 per $100. However, they vary based on your business's size, risk tolerance, and other variables.
Unemployment Insurance Tax (UI)
In Missouri, the first two or three years of a business are subject to UI tax at a new employer rate.
The general rate for UI is 2.511% and is uniform for all for-profit companies in a given sector. However, if your entity is a nonprofit, the unemployment insurance rate is 1%.
Once the employer qualifies based on the average taxable payroll, prior unemployment claims, and taxes paid in, the state calculates and determines a new experience rate for UI.
3. Local Taxes
Missouri allows each city and county to impose its local business taxes.
Drawing from experience managing several LLCs, the average local business tax in Missouri is 8.29%. However, it can go as high as 5.763% because some jurisdictions impose a local tax on products or services.
4. Industry Taxes
The Missouri Department of Revenue (DOR) imposes industry taxes as a state general or individual tax paid to specific industry agencies.
The common industry taxes in Missouri include:
- Alcoholic Beverages Tax
- Marijuana Tax
- Tobacco Tax
- Tire and Lead Battery Tax
- Motor Fuel Tax
What Is Tax-Deductible for an LLC in Missouri?
Tax-deductible for an LLC in Missouri include standard and itemized deductions, long-term care insurance deductions, first-time home buyers deductions, and special needs adoption tax credits.
Other tax-deductible include the following:
- Achieving a better life experience (ABLE) contribution deduction
- Food pantry, soup kitchen, homeless shelter tax credit
- Domestic violence or rape center tax credit
- Diaper bank tax credit
- Maternity home tax credit
- Health, hunger, and hygiene tax credit
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FAQs
Do Foreign LLCs Pay Tax in Missouri?
Yes, foreign LLCs pay tax in Missouri if they operate there. These taxes include taxable income tax, sales and use tax, federal income tax, workers' compensation, and state unemployment taxes.
What Deductions Can You Claim on Tax in Missouri?
The deductions you can claim on tax in Missouri include car and travel expenses, accounting fees, laundry, and home office running costs.
References:
- https://www.northwestregisteredagent.com/llc/missouri/taxes
- https://www.irs.gov/pub/irs-pdf/f1120.pdf
- https://www.irs.gov/pub/irs-pdf/f1040.pdf
- https://taxfoundation.org/location/missouri/
