Oklahoma Franchise Tax

Oklahoma franchise tax is mandatory for all for-profit corporations, including S-corporations, partnerships and “limited liability company” LLC entities organized, and maintained in Oklahoma. Reinstatement of the franchise tax in 2014, followed a moratorium and enactment of a “business activity tax” in 2010. The new franchise tax rule limits taxpayer annual obligation to $20,000 maximum each year.

Liability for Filing Return

Legal registration of a business in Oklahoma State, obliges an entity to tax reporting of income to the state’s Tax Commission and the federal Internal Revenue Service. Corporations and other for-profit businesses organized in the state are subject to rules of taxation under law. While type of business structure elected makes a difference in reporting and filing requirements at the federal level, the same entities are subject to a single franchise tax rule in the state.

If a business has filed “articles of incorporation” or “articles of organization” registering an entity with the Secretary of State, tax rules coincide with approved registration status. Exception to this rule is the filing of sole proprietorship LLC entities which are subject to the same rules of individual tax filers with a home business. The Oklahoma Secretary of State sos.gov website offers information about business registration and licensing.

Business entities registered in another state, district, territory, or foreign country, including joint stock companies, trusts, and associations, are responsible for filing state franchise tax if operating in Oklahoma, unless exempt by statutes elsewhere. Visit Oklahoma State Legislature website for more information about the tax statutes in the state.

Time for Filing and Payment Information

Oklahoma Franchise Tax is due July 1st each year. Registrants electing change an entity’s filing date to the same schedule of filing as their corporate income tax, franchise tax reporting and tax payment must be received by the fifteenth (15) day of the third month from end of corporate income tax year. Payments made after the scheduled deadline will subject to a ten percent penalty, and one and quarter percent (1.25 percent) interest per month until full payment is made.

If a company’s Charter or other structural instrument is suspended, the state imposes a reinstatement fee of $15.00. Filing a corporate income tax return extension requires a copy of request to file an extension with a franchise tax return. Extensions are granted based on tentative tax return and remittance estimate of tax due. The Oklahoma Tax Commission does not waive penalties or interest on remittances made post deadline. All franchise tax return documents must be legible for microfilming record.

Steps to Franchise Tax Return Filing

The steps to filing an Oklahoma Franchise Tax Return involve a line-item reporting of Annual Return, Balance Sheet income, Schedules A, B, C & D. 

Step 1: Balance Sheet and Schedules (B, C & D with annual return). Other information required to file includes cost of life insurance; intellectual property assets (i.e. copyrights, patents, trademarks), franchises. Note franchise value can be amortized over a lifetime.

Step 2: Oklahoma Annual Franchise Tax Return with Taxpayer FEIN.

Step 3: Schedule A Officer Information.

Step 4: File return, payment, balance sheet and schedules with FEIN, EIN, or Social Security numbers in case of multi-owner LLC partnerships where members are filing individual income tax returns to the federal government with IRS Form 1040 coinciding to Form 1065 reporting of LLC apportioned earnings distribution.

How Is Franchise Tax Calculated?

The franchise tax is calculated at a rate of $1.25 per $1,000.00 of capital employed in, or apportioned to Oklahoma. The franchise tax applies solely to corporations with capital of $201,000.00 or more. Eligible entities are required to remit the franchise tax, annually. In Oklahoma, the maximum amount of franchise tax a corporation will pay is $20,000.00. Corporations reporting zero franchise tax liability must still file an annual return.

Foreign corporations domiciled outside the jurisdiction, doing business in the state are not obliged to pay Oklahoma franchise tax, but are still liable for the $100.00 registered agent fee. Franchise tax returns are due on July 1 and record the previous income tax year balance sheet, regardless if an entity is a calendar-year or fiscal-year filer. A corporation that files its franchise tax return the same day as its income tax return shall use the annual report from the previous year.

When Do Franchise Tax Returns Become Delinquent?

Franchise tax returns and payment filed after 1 September are considered delinquent, unless the elected filing date of a corporation coincides with a fiscal-year schedule. In such case, delinquencies for returns and payments after the 15th day, fall at the end of the third month following the close of the corporate year.

What Are The Penalties For Paying Franchise Tax Late?

Payment for franchise tax liability not remitted by 1 September, are subject to Oklahoma Tax Commission penalties of 10 percent of the tax owed, with interest accrued at the rate of 1.25 percent monthly thereafter.

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