Missouri's Tax Climate Increases Your Return on Investment

Missouri's Corporate Income Tax rate ranked 8th in the nation according to the Tax Foundation's State Business Tax Climate Index Rankings for 2013.

Missouri’s corporate income tax rate of 6.25% is applied to Missouri taxable income. In Missouri, this is the same as federal taxable income. Missouri allows 50% of federal income tax payments to be deducted before computing taxable income, leading to an effective tax rate of 5.2%.

A franchise tax also applies to Missouri corporations. That tax is 1/50 of 1% (.000200) of the value of the proportion of the par value of shares or surplus greater than $10 million in Missouri for tax year 2013. Governor Nixon recently signed Senate Bill 19 which freezes the franchise tax liability for companies at the Tax Year 2010 level and eliminates the tax entirely by 2016.

A new corporation must pay an incorporation fee of $50 for the first $30,000 or less of shares and $5 for each additional $10,000 or portion thereof. A foreign corporation pays $150 for certification. Annual corporate registration fees must also be paid by domestic and foreign corporations doing business in Missouri. The rate is $40 annually for registration with the Secretary of State’s Office.

_{(Source: Missouri Department of Revenue)}

 

State Corporate Income Tax Rates (2013)
Source: Tax Foundation's State Business Tax Climate Index
State	Tax Rates and Brackets	Special Rates or Notes
Missouri	6.25%	Additional Franchise Tax at .033%. 7% on financial institutions. 50% of federal tax deductible.
Arkansas	1.0%>$0
	2.0%>$3,000
	3.0%>$6,000
	5.0%>$11,000
	6.0%>$25,000
	6.5%>$100,000
Illinois	9.5%>$0	Includes 2.5% income replacement tax. 1.5% for S-Corps.
Iowa	6.0%>$0	50% federal deductibility. Financial institutions are subject to a 5% franchise tax.
	8.0%>$25,000
	10.0%>$100,000
	12.0%>$250,000
Kansas	4.0%>$0
	7.05%>$50,000
Kentucky	4.0%>$0	Corporations must also pay the larger of a gross receipts tax equal to .095% of gross sales or .75% of gross profits, or a minimum tax of $175.
	5%>$50,000
	6%>$100,000
Nebraska	5.58%>$0
	7.81%>$100,000
Oklahoma	6%>$0	Additional franchise tax of $1.25 for each $1,000 of capital invested or used in Oklahoma.
Tennessee	6.5%>$0	Franchise tax of .25% of the greater of net worth or real and t angible property ($100 minimum).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

An important tax advantage for Missouri businesses is the amount of income considered taxable — only income earned in Missouri is taxed. Two allocation options are offered for calculating this income: (1) the three-factor formula, based on sales, property and payroll or (2) the single-factor formula, based only on sales. Missouri is one of the only states that permits companies to choose the income allocation formula that results in the lesser corporate income tax liability. This means that companies are not penalized for locating property and jobs in Missouri as they are in the other states. In addition, it is important to note that Missouri has not adopted worldwide or nationwide unitary tax assessment in computing multinational corporate income tax liability.
_{(Source: Missouri Department of Economic Development)}

Sales Tax: The state’s sales tax (4.225%) is imposed on the purchase price of tangible personal property or taxable service sold at retail.

Use Tax: The state’s use tax is also 4.225 percent, and it is imposed on the use, storage or consumption of tangible personal property shipped into Missouri from out of state.

Missouri communities have the option of adopting a local sales tax, generally ranging from one-half to one percent. Counties may also adopt a sales tax generally ranging from one-fourth to one percent. Communities have the option of adopting a local use tax equal to the local sales tax for that community.
_{(Source: Missouri Department of Revenue)}

State Sales and Gasoline Taxes (2013)
State	Sales Tax	Gas Tax (a)
Missouri	4.225%	17.3 cents
Arkansas	6%	21.8 cents
Illinois	6.25%	20.1 cents
Iowa	6.0%	22 cents
Kansas	6.3%	25 cents
Kentucky	6.0%	28.5 cents
Nebraska	5.5%	27.1 cents
Oklahoma	4.5%	17 cents
Tennessee	7%	21.4 cents
(a) In addition to the 18.4 cpg federal gasoline tax. Sources: American Petroleum Institute, state revenue departments, and Tax Foundation's State Business Tax Climate Index

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Missouri sales tax exemptions include:

• Machinery and equipment used to establish a new facility or expand an existing manufacturing facility, provided such machinery/equipment is used directly to manufacture a product ultimately intended for sale.
   
• Replacement machinery and equipment used directly in manufacturing a product ultimately intended for sale, provided their acquisition has been necessitated by reason of change in design or product, as opposed to obsolescence.
   
• Machinery, equipment and devices that abate air pollution. To qualify for this exemption, a company need only have the appropriate state governmental agency certify the equipment is pollution-control equipment.
   
• All materials and supplies used to install this tax-exempt machinery and equipment.
   
• Electricity consumed in the manufacturing process, provided the cost of the electricity exceeds 10% of total production costs. The cost of electrical energy consumed in the manufacturing process cannot be included in total production costs to qualify for the exemption. Electricity used for non-manufacturing purposes, such as heating and lighting, is taxable.
   
• Electricity or gas, whether national, artificial or propane, when used in connection with basic steel making.
   
• Energy, including electricity or natural gas, used in manufacturing, mining, compounding, processing or producing a product or used in research and development related to the items above may qualify for a state sales tax exemption.
   
• Anodes used in manufacturing or other types of production, with a useful life of less than one year.
   
• Certain property purchased by specific biotech, medical and veterinary labs for use in research and experimentation activity. 
  _{(Source: Missouri Department of Economic Development)}

Assessment rate for utility, industrial, railroad and all other real property is 32%. The local property tax rate is an aggregate of school, city, county and state levies expressed in tax per $100 assessed valuation. Each local taxing entity has a separate rate, and the average total rate is $6.85 per $100 assessed value. Commercial and industrial real property is assessed an additional county surcharge designed to replace revenues lost by the tax exemption of business inventories. Inventory is exempt from property taxes.

Example:

Appraised value: $10 million (assume no growth in value in future years)

Assessment rate: 32%

Assessed value: $3.2 million

Tax Rate: $6.50 per $100 of Assessed Value

Tax: $208,000/year, or $3.12 million over 15 years
_{(Source: Missouri State Tax Commission and Missouri Department of Economic Development)}

Missouri applies an income tax of $315 plus 6.0% of federal taxable income over $9,000.

Example:

$70,000 gross income - $30,000 deductions = $40,000 taxable income
$40,000 - $9,000 = $31,000 X 6% = $1,860 + $315 = $2,175 tax
_{(Source: Missouri Department of Economic Development)} 

In every state, business and industry incur some expense to provide their employees with workers’ compensation coverage. Missouri enacted tough new laws curbing abuse, increasing employee responsibility for injury, and limiting employer liability and payment in August 2005. All businesses with five or more employees in Missouri (except agricultural or domestic labor) must provide workers’ compensation insurance to protect their workers in case of job-related injury, illness or death. Companies can offer this protection through a private insurance carrier, or they can become self-insurers. Premium rates vary, depending on the risks associated with special occupations. As in most states, the premium rates apply to an employee’s total annual salary. Missouri’s workers’ compensation rates compare very favorably with those in other states. Though benefits for claimants in other states usually increase automatically from year to year, in Missouri benefits cannot be increased without the review and approval of the state legislature.

The State Average Weekly Wage (SAWW) used to determine maximum workers' compensation benefits for the fiscal year beginning beginning July 1, 2012 and ending June 30, 2013 is $788.33.This SAWW produces the maximum weekly benefit rates for injury and illness occurring on or after July 1, 2012, as follows:

Temporary Total Disability: $827.75
Permanent Total Disability: $827.75
Permanent Partial Disability: $433.58
Death: $827.75

The actual weekly wage rate necessary to attain the maximum benefit rate is $1241.63 for Death, Temporary Total Disability and Permanent Total Disability and $650.37 for Permanent Partial Disability.

_{(Source: Missouri Dept. of Labor and Industrial Relations)}

Most companies doing business in Missouri are required to pay unemployment insurance to protect their workers during unemployment. This applies to most businesses having one or more workers on the payroll for 20 weeks during the calendar year and to businesses paying $1,500 in total wages in a given quarter. All employers, except those making reimbursable payments, have an assigned tax rate. An employer's rate may change each year.

For its first two or three years, an employer receives the new employer rate. This is a rate assigned to all new employers of the same industrial classification. Eventually an employer becomes eligible for an experience rate. This is a rate calculated based on the ratio between an employer's average annual taxable payroll, unemployment claims against its account, and taxes paid in previously by the employer.

Each employer that becomes liable to report workers’ wages and pay unemployment taxes is assigned to an industrial classification division. Until eligible for an experience rate regular employers (not including governmental entities and certain nonprofit organizations) are assigned an annual tax rate, which is the average tax rate computed during the preceding year of all employers within the industrial classification division to which assigned, or 2.7%, whichever is the highest.

Depending on the cash balance of the Unemployment Trust Fund, there may be an increase or decrease to these annual rates.

In 2012, beginning rates for all new employers will be 3.510% except for those in the construction-related industries. The contribution rate for construction will be 5.043%. An employer generally becomes eligible for an experience rate after two full years of liability under the law. An experience rate is based on a ratio arrived at by dividing an employer's account balance by its average annual taxable payroll. Rates could range from 0.0% to 6.0%, not including surcharge and/or a percentage increase/decrease.

There is a limit on the amount of wages paid to an individual worker in a calendar year on which each employer must pay a tax. The limit is $13,000 for 2012.
_{(Source: Missouri Department of Labor and Industrial Relations)}