Corporation Franchise Tax - FAQs
Franchise tax is not based upon whether or not a corporation is a franchise. It is a business tax based upon a corporation's assets.
Franchise tax is based upon the assets in or apportioned to Missouri. If 100 percent of the corporation's assets are located in Missouri, then the balance sheet total equals the taxable base. If a corporation has assets both within and without Missouri, then the taxpayer must use the formula on Schedule MO-FT (Missouri percentage of apportionment multiplied by par value of issued and outstanding stock or adjusted total assets, whichever is greater) to determine the taxable base.
Yes. Beginning with franchise taxable years on or after January 1, 2000, all corporations incorporated, engaged, or qualified to do business in Missouri are required to file a franchise tax return and indicate if no tax is due. You may use one of the following forms to indicate your assets do not exceed $1 million (taxable years 2000 through 2009) or $10 million (taxable years 2010 through 2015):
- Form MO-1120 if filing as a C-corporation,
- Form MO-1120S if filing as an S-corporation, or
- Form MO-NFT with Form 1040 if you are an officer of the corporation.
Franchise tax must be paid if the corporation's assets (in or apportioned to Missouri) exceed one million dollars for franchise taxable years beginning on or after January 1, 2000, or ten million dollars for franchise taxable periods beginning on or after January 1, 2010. For franchise taxable years beginning on or after January 1, 2016, no franchise tax will be due.
Public Law 86-272 provides protection for a corporation for income tax and restricts a state from imposing an income tax. Public Law 86-272 does not apply to franchise tax.
Missouri franchise tax is based on assets and is not covered under Public Law 86-272. Section 147.010(1)RSMo, outlines the franchise tax obligations. Missouri CSR 10-9.200, sets out the policy regarding the franchise tax report. If a business is incorporated, qualified, or otherwise engaged in business, it must file a return and pay any tax due.
All domestic corporations and all foreign corporations engaged in business (such as having destination sales) or likewise qualified to do business (registered with the Secretary of State’s Office) must file and/or pay franchise tax.
For corporations having assets employed both within and without Missouri, all receivables that are based on Missouri destination sales are reported as Missouri accounts receivable on Schedule MO-FT.
If exact figures for Missouri receivables are not kept in the books and records of the taxpayer, the taxpayer may multiply its Missouri destination sales percentage by its total accounts receivable.
Yes, because the destination of the good(s) is in Missouri.
For tax years beginning on or after January 1, 2000 for corporation income tax and on or after January 1, 2001 for franchise tax, the franchise tax must be reported with Form MO-1120 or MO-1120S. Schedule MO-FT must be included with either Form MO-1120 or Form MO-1120S. If you are not required to file Form MO-1120 or MO-1120S for corporation income tax purposes, you must complete the upper portion of either of these two forms, mark the box "franchise tax only" and then complete Schedule MO-FT.
Franchise tax is computed based upon the current rate of tax multiplied by the taxable base. For all taxable periods prior to January 1, 2000, the tax rate was 1/20 of 1 percent (.0005). The tax rate for periods beginning January 1, 2000 is below:
|Tax Year beginning on or after||Tax Rate|
|January 1, 2000 – December 31, 2009||1/30 of 1% (.000333)|
|January 1, 2010 – December 31, 2011||1/30 of 1% (.000333)|
|January 1, 2012 – December 31, 2012||1/37 of 1% (.000270)|
|January 1, 2013 – December 31, 2013||1/50 of 1% (.000200)|
|January 1, 2014 – December 31, 2014||1/75 of 1% (.000133)|
|January 1, 2015 – December 31, 2015||1/150 of 1% (.000067)|
|January 1, 2016||0%|
A corporation’s franchise tax liability for tax years beginning on or after January 1, 2011, is computed as indicated above using the applicable percentage. However, a corporation’s franchise tax liability for tax years beginning on or after January 1, 2011, is limited to the franchise tax liability approved on the corporation’s return for the tax year ending on or before December 31, 2010. If the corporation was not required to file a franchise tax return for the tax year ending on or before December 31, 2010, because such corporation was not in existence or doing business in Missouri, the annual franchise tax for the first taxable year in which such corporation exists shall be determined by applying the applicable rate of tax to the corporation's outstanding shares and surplus if the outstanding shares and surplus exceed ten million dollars, but in no case shall such corporation's tax liability for any subsequent taxable year exceed the amount of annual franchise tax liability of such corporation for the first full taxable year such corporation was in existence or doing business in Missouri. This is referred to as the ‘base year’ franchise tax return. See the below examples for more information.
Example 1: Company A filed a 2010 calendar year return reporting a franchise tax liability of $10,000. The same corporation filed the 2011 calendar year return with an approved extension on September 1, 2011, calculating a franchise tax liability of $15,000. Since Company A’s 2010 return ended on December 31, 2010, it is the ‘base year’ franchise tax return. Since the 2010 return has an approved franchise tax liability less than the 2011 franchise tax liability, Company A’s 2011 franchise tax liability is limited to the franchise tax liability approved on the base year return $10,000.
|Corporate Income Tax Filing Periods||Corporate Franchise||Base Year Franchise Tax Return|
|01/01/11 - 12/13/11||01/01/12 - 12/31/12||-|
|01/01/10 - 12/31/10||01/01/11 - 12/31/11||Base year applies if filed after August 27, 2011|
|-||01/01/10 - 12/31/10||Base year return|
Example 2: Company B files a 2009 fiscal year return for the tax period of April 1, 2009, through March 31, 2010, with a franchise tax liability of $7,500. Company B later files a 2010 fiscal year return for the tax period of April 1, 2010, through March 31, 2011, with an approved franchise tax liability of $10,000, and a 2011 fiscal year return for the tax period of April 1, 2011, through March 31, 2012, with an approved franchise tax liability of $9,250. The fiscal year 2009 return would be considered the ‘base year’ franchise return since it ends before December 31, 2010. Since the fiscal year 2010 return begins before January 1, 2011, it does not qualify for the base year limitation. The fiscal year 2011 return begins after January 1, 2011. Therefore, the franchise tax liability for that period is limited to the franchise tax approved on the base year return of $7,500.
|Corporate Income Tax Filing Periods||Corporate Franchise Tax Filing Periods||Base Year Franchise Tax Return|
|04/01/10 - 03/31/11||04/01/11 - 03/31/12||Base year applies if filed after August 27, 2011|
|04/01/09 - 03/31/10||04/01/10 - 03/31/11||Base year does not apply|
|04/01/08 - 03/31/09||04/01/09 - 03/31/10||Base year return|
Example 3: Company C began doing business in Missouri on January 1, 2011, and files calendar year returns. They were not doing business in Missouri in 2010 and were not required to file a 2010 Missouri return. Therefore, Company C’s 2011 franchise return will be considered its base year return.
|Corporate Income Tax Filing Periods||Corporate Franchise Tax Filing Periods||Base Year Franchise Tax Return|
|01/01/11 - 12/31/11||01/01/12 - 12/31/12||Base year applies if filed after August 27, 2011|
|-||01/01/11 - 12/31/11||Base year return|
The due date is determined by the beginning date of the corporation's taxable period. The return is due the fifteenth day of the fourth month from the beginning of the taxable period. For example, if a corporation's year-end is December 31, 2014, then its 2015 franchise tax return is due April 15, 2015. For fiscal year-end corporations, such as March 31, 2015, their 2015 franchise tax return due date is July 15, 2015.
The corporation must use the assets as of the first day of the taxable period. For example, a calendar 2015 franchise tax return is based on assets as of December 31, 2014 or January 1, 2015 and it covers the taxable period from January 1, 2015 to December 31, 2015. A fiscal year-end taxpayer (for example) uses the March 31, 2015 or April 1, 2015 balance sheet for the taxable period from April 1, 2015 to March 31, 2016.
Franchise tax is filed for the year in advance, based upon the assets as of the first day of the taxable period. For example, if a new entity incorporates or qualifies in Missouri April 3, 2015, and its accounting period ends December 31, 2015, it is required to file its initial franchise tax return the fifteenth day of the fourth month from the beginning of the taxable period. Thus, the due date for the initial franchise tax return is August 15, 2015, based on assets as of its incorporation or qualification date, for the taxable period from April 3, 2015 to December 31, 2015. Since the initial corporation income tax return is filed after the end of the first accounting year, the original franchise tax return is filed as a franchise tax only return.
No. Each entity engaged in business and/or incorporated/qualified in Missouri is required to file its own individual franchise tax return based upon its assets in or apportioned to Missouri. Each entity must file using its own Missouri tax identification number issued by the Department.
After the correct due date of the return is determined, the method of calculating late fees is as follows:
- Interest is calculated on a daily rate from the date due to the date paid. See the franchise tax form for applicable interest rate.
- Penalty is calculated at 5 percent per month from the original due date, not to exceed 25 percent.
- If the extension estimate paid is not at least 90 percent of the franchise tax due for the current year, then penalty is calculated from the original due date to the date paid. Interest is always calculated on any unpaid balance of tax from the original due date to the date paid, regardless of whether or not an extension has been filed.
Short periods may be filed for the following situations:
- A new corporation
- A change in accounting periods
- A merger
- A termination
- A withdrawal
If you are filing a short period for a reason other than those previously stated you must attach a detailed explanation when filing your MO-1120. You will be notified if the short period is disallowed or adjustments were made to a previously filed return.
A short period franchise tax return may not be required when there is a change in ownership unless there has been a subsequent change in accounting periods. Normally, the prior and present owners pro-rate the taxes during the course of the sale of the business.
QSSS's are treated the same way for Missouri income tax purposes as they are treated with the Internal Revenue Service. One Form MO-1120S is filed under the parent's name and includes all of the activity of the parent and subsidiaries. However, for Missouri franchise tax purposes, each company (parent and subsidiaries) must file a separate Schedule MO-FT. For example, Company P and QSSS companies S1 and S2 file a Federal Form 1120S as parent and qualified Subchapter S subsidiaries. Company P would file Form MO-1120S as Company P and subsidiaries. Company P would complete Schedule MO-FT on just its balance sheet items. Subsidiaries S1 and S2 will file separate Form MO-1120S, mark the box indicating the filing is for "Franchise Tax Only" and complete Schedule MO-FT on each company's balance sheet. Each company would be responsible for paying their franchise tax on the separate Form MO-1120S.
Your federal extension also extends your time to file a franchise tax return to Missouri. This does not extend the time to pay. The corporation should pay at least 90 percent of the estimated current year's tax with the extension request.
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