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Oklahoma Basic Business Taxes 2014

Area Development Online Research Desk (Q1 2014)
Corporate income tax:
A 6 percent corporate income tax is imposed on the net taxable incomes of corporations attributable to state sources. There is no worldwide unitary tax. Income tax credits for manufacturers and some service companies may be carried forward up to 20 years.

Sales and use taxes:
A 4.5 percent state sales tax is levied on the sale, rental, or lease of tangible personal property. Items sold for resale are not taxed. Businesses are allowed a deduction of 2.25 percent of the tax due for collecting the tax and record keeping provided they file electronically.

A 4.5 percent state use tax is imposed on tangible personal property purchased or brought into the state for storage, use, or consumption that is not subject to the sales tax. Items exempt from sales tax are also exempt from use tax.

Counties or cities may levy a local sales and use tax.

Sales tax exemptions:
Oklahoma's sales tax exemption program offers exemptions in the following areas:
1. Machinery and equipment used directly in the manufacturing process, including replacement parts;
2. Tangible personal property that becomes part of the finished product, including fuel;
3. Interstate 1-800, WATS and private-line business telecommunications systems;
4. Containers that are sold to persons regularly engaged in reselling empty or filled one-way containers or when the containers are purchased to package raw materials;
5. Primary and secondary packaging materials used to pack, ship, or deliver tangible personal property may be purchased sales-tax exempt by a manufacturer or producer (does not apply to returnable containers or reusable packaging in some circumstances);
6. Machinery, equipment, fuels and chemicals used directly or in treating controlled industrial waste (approval is required by the State Department of Environmental Quality); 7. Sales by manufacturers of personal property to one who transports it to another state for immediate and exclusive use;
8. Certain aircraft and parts at qualified aircraft-maintenance facilities;
9. Machinery and equipment purchased and used by certain computer-service and data-processing companies with significant out-of-state sales;
10. Sales of tangible property to a space port user.

Property tax:
The state levies no property tax. Real property not specifically exempted is subject to local property taxation. Personal property of households may not be taxed in some counties. There is no tax on intangible property.

Property is assessed in the taxing districts where located. Assessment rates are between 11 percent and 13 percent on real property and 10 percent and 15 percent on personal property. The actual tax rate is the aggregate of all levies of all local taxing authorities.

Property tax abatement:
A constitutional amendment allows the state to reimburse counties for a five-year ad valorem tax exemption for new, expanded, or acquired manufacturing facilities, research/development facilities, some computer services, data processing services, and some warehouse distribution facilities. Land, buildings, machinery and equipment used directly in the manufacturing process are eligible. Threshold requirements for the exemption require a capital investment of at least $250,000 and new payroll of $250,000 in counties with a population of 50,000 residents or fewer, and maintenance of the same payroll for each of the four subsequent years of the exemption. If the company is located in a larger county, an additional annualized payroll of at least $1 million is required. However, if a $7 million investment is made in new facilities for certain computer service companies already in the program, no new payroll is required. No manufacturing concern can receive more than one five-year exemption unless an expansion meets the capital investment and employee payroll requirements. A strictly local abatement (no state reimbursement) is available to new businesses (except retail - does not include hotel/motel) in certain incentive districts.

Income tax credits/exclusions:
Oklahoma's income tax credits/exclusions include the following:
1. Job creation tax credit: Through the investment/new jobs tax credit for manufacturing, processing, or aircraft maintenance operations, a credit of one percent on corporate income tax is allowed for investment in qualified depreciable property. If the investment credit is taken, a minimum of $50,000 qualified investment in a tax year is required or a credit of $500 is allowed for each new full-time equivalent manufacturing employee, whichever is greater. In enterprise zones the credit is doubled. Employment must not decrease. This credit is also doubled if a business invests $40 million in the first three years.
2. Technology transfer: Corporations assisting small businesses with technology transfer are entitled to special income tax exemptions on royalties received.
3. New product development: Royalties earned by an inventor on products developed and manufactured in the state are exempt from state income tax for seven years (product must be patented or patent pending). Manufacturers may exclude from Oklahoma taxable income 65 percent of the cost of depreciable property purchased and utilized directly in the manufacturing of the products. The maximum exclusion is $500,000. It may be carried forward for four years.
4. Clean-burning motor fuel: There is a one-time tax credit for equipment installed to modify a motor vehicle from gasoline propellant to compressed natural gas, liquefied natural gas, or liquefied petroleum gas.
5. Business Incubators: Other income tax exclusions are available for sponsors and tenants in business incubators and hazardous-waste recycling plants.
6. Agricultural commodity-processing facility: Owners of agricultural commodity-processing facilities may exempt from income 15 percent of the total investment in facilities beginning in 1997. After 1999, certain ceilings apply.
7. Ethanol Facility: Owners of an ethanol facility may receive income tax credits of twenty cents per gallon of production for up to five years.
8. Food-processing investment: An income tax credit of 30 percent of investment is available to Oklahoma agricultural producer investors in Oklahoma producer-owned agricultural processing ventures, cooperatives, or marketing associations. The investor must be an owner who owns a qualified facility, which may be processing plants, marketing associations or investment firms. The facility must do more than merely store, clean, or transport agricultural commodities.
9. Insurance Premium Tax Credit: Insurance companies that locate or expand regional home offices in Oklahoma and maintain an employee level above 200 are eligible for special tax credits against the tax imposed in the Insurance Code. Annual credits range from 15 percent to 50 percent based on the numbers of full-time, year-round employees.
10. Venture Capital Tax Credit: Investment in qualified venture capital companies creates a transferable income tax credit or premium tax credit. Venture Capital companies must be capitalized at a minimum of $5 million and invest at least 55 percent of those dollars in qualified Oklahoma companies over a 10-year period. The credit equals 20 percent of the cash invested.
11. New Markets Tax Credits: Two Oklahoma organizations have been selected as eligible Community Development Entities (CDE's) for purposes of the New Markets Tax Credits on behalf of the U.S. Department of Treasury. The CDE's are the REI New Markets Investment, LLC, and Meta Fund, Inc. Investors in these organizations earn federal income tax credits when the organizations invest in underserved low-income communities. The credits are five percent of investment for the first three years of the credit and six percent for the last four years of the credit, for a total of 39 percent of investment over the seven years of credit period.

Freeport law:
Oklahoma’s “Freeport Exemption” refers to the Oklahoma Constitutional provision contained in Oklahoma Constitution Article 10, Section 6A relating to property moving through the state and exempt from taxation goods, wares and merchandise held for assembly, storage, manufacturing, processing or fabricating purposes if not for more than nine (9) months. This exemption must be filed with the county assessor by March 15th as other exemption applications.

The Oklahoma State Constitution and Title 68 O.S. § 2805 exempt intangible personal property including cash, receivables, bonds, stocks, and annuities from ad valorem taxation.

All tangible personal property is reported to the County Assessor no later than March 15th of each year. A Freeport exemption application must accompany the report. For more information, contact the Oklahoma Tax Commission at (405) 319-8200 or helpmaster@oktax.state.ok.us.

Construction materials tax refunds:
Refunds of sales taxes on construction materials are available for new or expanding manufacturing facilities, including:
  • Facilities with construction costs exceeding $5 million that create 100 new jobs - maintained for a minimum of 36 months.
  • Facilities with construction costs exceeding $10 million, and the combined total of material, construction, and machinery exceeding $50 million, that add 75 new employees.
  • Qualified new or expanding aircraft maintenance and manufacturing facilities that create 250 or more jobs, with investment totaling at least $5 million.
  • Distribution centers for Oklahoma manufacturers or land used for packing, repackaging, labeling, or assembling for distribution products at least 70 percent made in Oklahoma but at an off-site, in-state manufacturing facility or facilities may qualify.
Oklahoma Film Act:
The Oklahoma Film Enhancement Rebate Act allows a rebate of up to 37% of qualified expenditures made in Oklahoma that are directly attributable to film, television production, television commercial, and theatre. Qualifying Expenditures for productions include the cost of construction and operations, photography, sound synchronization, wages and wardrobe, facilities, and related services. The minimum budget for the project shall be $50,000 with a minimum of $25,000 spent in Oklahoma. This rebate has a sunset date of July 1, 2014.

In addition to the rebate, the State of Oklahoma offers a Point-of-Purchase sales tax exemption to qualifying productions on sales tax paid for property or services to be used in productions. The POP Sales Tax Exemption cannot be used in conjunction with the rebate, and there is no minimum budget or expenditure requirement.

For more information, contact Jill Simpson at the Oklahoma Film & Music Office at (800) 766-3456 or by email at jill@oklahomafilm.org.

Other exemptions/refunds:
A sales tax exemption is available to certain businesses for the purchase of computers, data processing equipment, related peripherals, and telegraph or telecommunications services and equipment when at least 50 percent of the annual gross revenue of the business is generated by sales of product or service to an out-of-state buyer or consumer (including the federal government). Seventy-five percent of annual gross income must be from R&D. These companies may receive sales tax refunds for such purchases if the business employs at least 10 new workers at an average salary of $35,000 for at least three years.

Aircraft Manufacturing Facility:
Oklahoma provides a sales tax exemption for sales of computers, data processing equipment, related peripherals and telephone, telegraph or telecommunications service and equipment for use in a qualified aircraft maintenance or manufacturing facility. A "qualified aircraft maintenance or manufacturing facility" means:
  • a new or expanding facility primarily engaged in aircraft repair, building or rebuilding whether or not on a factory basis.
  • A facility whose total cost of construction exceeds the sum of Five Million Dollars ($5,000,000.00) and which employs at least two hundred fifty (250) new full-time-equivalent employees, as certified by the Oklahoma Employment Security Commission, upon completion of the facility.
In order to qualify for the exemption, the cost of the items purchased by the qualified aircraft maintenance or manufacturing facility shall equal or exceed the sum of Two Million Dollars ($2,000,000.00).

For more information about filing, the required affidavit and certification, contact the Oklahoma Tax Commission at (405) 521-3133 or otcmaster@tax.ok.gov. For forms, visit www.oktax.state.ok.us.

Excise Tax on Aircraft Sales:
Effective November 1, 2013.
Generally, excise tax in lieu of sales tax is imposed on the sale, transfer, or lease of aircraft that will be based in Oklahoma. In 2013 the following provision was added:
Exempts rotary-winged aircraft purchased to be used exclusively for the purpose of training U.S. military personnel or other training authorized by the U.S. Government from the levy of aircraft excise tax. The exemption will sunset January 1, 2018.

For more information and certification, contact the Oklahoma Aeronautics Commission at (405) 604-6900. Sales of aircraft to commercial airlines are free of the excise sales charge.

Oklahoma State Contact:
Oklahoma Department of Commerce
900 N. Stiles
Oklahoma City, OK 73126-0980
(405) 815-5148 or (800) 588-5959
www.okcommerce.gov


Incentive and tax information is provided to Area Development by each state's economic development or commerce agency for information purposes only and is subject to revision at any time by the state government. Please contact the state agency directly for full requirements and offerings.

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