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Oklahoma LLC Taxes

In Oklahoma, LLCs are taxed as pass-through entities by default, meaning the LLC passes its revenues and losses on to its members. Then members pay the state’s graduated personal income tax rate ranging from 0.25% to 4.75% and the state’s Pass-Through Entity Tax of 4%. Members are also taxed at the 15.3% federal self-employment tax rate (12.4% for social security and 2.9% for Medicare). For LLCs that have C-corp tax election, they’ll have to pay Oklahoma’s corporate income tax rate of 4%. Oklahoma assesses a local sales tax that maxes out at 7%. Learn what you need to know about Oklahoma LLC taxes.

In this article, we’ll cover:

  1. How Are Oklahoma LLCs Taxed?
  2. Oklahoma State Income Tax
  3. Sales and Use Tax
  4. Local Oklahoma Taxes
  5. Other Taxes in Oklahoma
  6. Do foreign LLCs in Oklahoma need to pay Oklahoma taxes?

How Are Oklahoma LLCs Taxed?

The default filing status of your LLC is based on how many members your Oklahoma LLC has. Single-member LLCs (SMLLC) file taxes as sole proprietorships and are considered “disregarded entities,” while multi-member LLCs file with partnership status.

Either way, LLC members pay individual income taxes on the earnings passed on through the LLC plus the state’s Pass-Through Entity Tax of 4%. At the federal level, the self-employment tax rate is 15.3% (12.4% for social security and 2.9% for Medicare). The federal tax forms you’ll need to file under default status are:

LLCs are flexible, though! You can have your business taxed as an S-corp or C-corp.

Oklahoma LLCs taxed as S-corp

An S-Corporation (S-corp) is a federal tax election available to both corporations and LLCs. Like corporations, LLCs with S-corp status can make distributions without having to pay the 15.3% self-employment tax. You will still have to pay it on salaries, just not dividends. Essentially, with S-corp status, your LLC still keeps its pass-through status and drops the self-employment tax.

You must apply for S-corp tax status by filing Form 2553 with the IRS and meeting the IRS S-corp requirements. It’s a wise decision to speak with a CPA before making any tax status changes to your business.

Learn more about the S-Corp tax election.

LLCs taxed as C-corp

C-corp status is the default tax status for corporations, but in very rare cases, LLCs find it beneficial to elect to be taxed as C-corps. You will want to consult with a tax professional before changing your tax status. Investors find LLCs with C-corp status more attractive. You will, however, have to pay the 21% federal corporate income tax, Oklahoma’s 4% corporate income tax, and the state’s franchise tax. To file your taxes with the IRS as a C-corp, you’ll need to submit Form 1120.

Learn how to apply for C-corp status as an LLC.

Oklahoma State Income Tax

In Oklahoma, LLCs with default tax or S-corp status pay Oklahoma’s individual graduated income tax rate ranging from 0.25% to 4.75% and the state’s Pass-Through Entity Tax of 4%. LLCs with C-corp status pay Oklahoma’s 4% corporate income tax rate and the state’s franchise tax that maxes out at $20,000 and is assessed at the rate of $1.25 per $1,000.00.

To file your Oklahoma state income taxes as an S-corp or C-corp, use the Oklahoma Small Business Corporation Income and Franchise Tax Forms. For filing the individual income tax, use the Oklahoma Resident Individual Income Tax Forms.

Sales and Use Tax

Oklahoma has a state sales and use tax rate of 4.50% and a local-level rate that ranges with a maximum of 7%. Some local municipalities don’t require businesses to collect a sales and use tax, but you’ll need to check with your county clerk. You only need to collect sales tax if you sell at least $100,000 worth of taxable merchandise. Remote sellers who sell under $100,000 must still collect a use tax.

Local Oklahoma Taxes

While you may need to pay a local-level sales and use tax, you don’t have to worry about any local business taxes your LLC will need to pay. If your business owns property, you will, however, owe property taxes. To figure out your property tax rate, contact the department in charge of property taxes in your local jurisdiction.

Other Taxes in Oklahoma

Here are some other taxes imposed by the state of Oklahoma.

Oklahoma State Employer Taxes

Oklahoma requires employers to pay workers’ compensation insurance and unemployment benefits.

  • Unemployment (UI) Tax—Oklahoma requires all new LLCs to pay a flat contribution rate of 1.5%. After one year of contributing, your rate is reassessed by the Oklahoma Employment Security Commission.
  • Workers’ Compensation—Oklahoma requires all employers to purchase workers’ compensation insurance for their employees. To get workers’ compensation insurance, you’ll need to sign up with a private insurer. Your rates will depend on factors like location, risk of injury, and number of employees. You don’t have to insure independent contractors.

To learn more about Oklahoma employer taxes, visit the Oklahoma Employment Security Commission website.

Industry Taxes

Oklahoma also taxes certain industries, meaning your LLC may need to pay additional fees like:

  • Alcohol and Tobacco Permit
  • Motor Fuel Tax
  • Agriculture Permit

Find more information on industry taxes on the Oklahoma Tax Commission’s Business Taxes page.

Do foreign LLCs in Oklahoma need to pay Oklahoma taxes?

Yes. If you have an Oklahoma foreign LLC, you will have to pay the same taxes as domestic LLCs. You will also have to pay state and local sales and use taxes if you set up a physical location in Oklahoma. Your LLC is viewed as a foreign LLC if it was originally formed in another state and registered with the Oklahoma Secretary of State to do business in the state.