Oklahoma repealed its franchise tax through legislative action in 2023, marking a significant shift in the state's business taxation approach.
By scrapping the franchise tax, the state simplified its tax structure and reduced paperwork for businesses, particularly those operating in multiple states. Oklahoma’s lack of franchise tax contrasts with states like Delaware, Texas, or Illinois, where companies continue to navigate the complexities of the franchise tax model.
Although Oklahoma eliminated its franchise tax in 2023, businesses will have to pay any taxes owed for 2023 or prior. The deadline to align franchise and corporate income tax filing periods has passed, so you’ll need to contact the Secretary of State if you think you still owe.
Specific penalties weren’t provided, but Oklahoma typically charges interest and percentage-based penalties on late or missed tax payments. The state warns that any unpaid franchise tax may lead to corporate suspension until the debt is settled.
Companies suspended before 2024 for franchise tax non-payment still need to fulfill those obligations.
While there is no longer an Oklahoma franchise tax, some entities must file an annual report (called an Annual Certificate) with the Oklahoma Secretary of State. These filings come with fees that are generally much lower than the former franchise tax.
Corporations with an Oklahoma foreign qualification will also pay the annual registered agent fee of $100 via Form 200-R (due July 1).
Oklahoma businesses may be responsible for additional taxes.
The Quality Jobs Program offers quarterly cash rebates to companies creating new jobs. The state also provides an Investment/New Jobs Tax Credit for businesses making capital investments or creating jobs in manufacturing, processing, or aircraft maintenance.
Is the franchise tax elimination retroactive?
No, the elimination applies to tax years beginning on or after January 1, 2024. Taxpayers must still file and pay franchise tax for 2023 and the years prior.
Are refunds available for prepaid franchise taxes?
Generally, no refunds are available for taxes paid for years before 2023. Any taxes owed for previous years must still be paid.
What record-keeping requirements remain after the tax elimination?
While franchise tax filing is no longer required, keep records of previous filings for at least three years in case of an audit.
Does this change affect my other Oklahoma tax obligations?
No, other tax obligations, such as income and sales taxes, remain unchanged. Continue complying with all other applicable Oklahoma tax laws.
As a multi-state business, how does this impact my overall tax strategy?
This change simplifies your Oklahoma tax compliance, potentially reducing administrative costs. Update your tax planning to account for the elimination of the franchise tax while maintaining compliance in other states.
Are there any new forms or filings that replace the franchise tax return?
While the franchise tax return is eliminated, you may still need to file an Annual Certificate. Check with the Oklahoma Secretary of State for requirements specific to your entity type.
By staying informed on new compliance requirements and adjusting your strategies, you can maintain good standing while benefiting from Oklahoma's simpler tax environment.
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