Missouri Franchise Tax: Everything You Need to Know
Missouri franchise tax is paid by all corporations doing business in the state.3 min read
2. Foreign Corporations
3. New Businesses
4. Extensions and Penalties
Missouri franchise tax is paid by all corporations doing business in the state. Companies required to pay the tax must file Form MO-1120 or Form MO-1120S when paying their tax bill. Missouri has been collecting franchise tax from businesses since 1970.
Paying Franchise Tax
To determine how much franchise tax needs to be paid, calculations should be based on your company's total assets or the value of outstanding and issued stock, whichever is higher. When you file, you must attach a copy of your balance sheet for the tax period concerned and any supporting documentation, such as information about your assets.
However, if your company's total assets in Missouri are less than $1 million, you do not have to pay franchise tax. Even so, you will still have to file to claim your exemption.
You should also keep in mind that your business may be able to claim certain credits to offset their tax bill.
Other corporations and small businesses that may be excluded from the tax include:
- Industrial development authorities
- Some electric and telecommunications companies
- Savings and loan associations
- Mutual insurance companies without shares
Missouri's franchise tax rate has been reduced over recent years. Some business groups want to see the tax eliminated, arguing it would help businesses grow and encourage new start-ups.
Opponents of the move point out that the state will lose revenue, which could negatively impact education and other public services.
Foreign corporations doing business in Missouri are also subject to franchise tax.
In an important legal ruling, the state's Supreme Court found that an out-of-state corporation still has to pay franchise tax if it owns a limited partnership doing business in Missouri. According to the company, it could not have been engaged in business in Missouri because it didn't directly own any assets in the state during the period of time concerned. However, the court ruled that no matter where the company's assets were based, it made use of those assets to carry out business in Missouri. The court also ruled that the company had to prove that the state's calculation of the amount of tax it owed was false.
As a result of this court ruling, when determining whether or not your company must pay franchise tax, it makes no difference whether your company uses the state's assets directly or if a limited partnership owned by your company does business in Missouri.
Newly-established companies subject to franchise tax will have a filing deadline of the 15th day of the fourth month after incorporation. This means that a company using the calendar year for reporting purposes has to file and pay the tax by April 15 every year. When filing its taxes, a new business should attach its balance sheet from the day of its incorporation.
The same regulation applies to foreign corporations, which have until the 15th day of the fourth month after they start doing business in the state to file.
Extensions and Penalties
Your company can request extra time to file documentation and pay the franchise tax. To do this, you need to complete Form MO-60. In addition, a check worth 90 percent of the tax due must be included with your extension request.
Failure to file your tax return and pay the amount by the due date can result in penalties. A charge of 5 percent per month, with a maximum charge of 25 percent in total, is charged until the tax is paid. Additionally, 5 percent is added to the tax bill for the year that remained outstanding on the due date.
The additions to the tax may be avoided if:
- At least 90 percent of the tax due was paid prior to or on the due date
- The balance is paid prior to or on the date of the return
In addition, the state will charge interest on overdue taxes until they are paid. Beginning in 2001, the interest rate is 10 percent per annum.
If your company fails to file its franchise tax within 90 days of the original due date or within 90 days of an agreed upon extension, it will lose its charter in Missouri. This is known as administrative dissolution.
If you need help with filing your Missouri franchise tax, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.