Key Takeaways

  • Missouri historically required corporations to pay franchise tax based on assets or stock value, but exemptions applied if assets in Missouri were under $1 million.
  • Foreign corporations are also liable for Missouri franchise tax if they or their limited partnerships conduct business in the state.
  • New corporations, both domestic and foreign, must file within the fourth month after formation or registration.
  • Extensions are available with Form MO-60, but penalties and interest apply for late filings or payments.
  • Missouri lawmakers phased out the franchise tax entirely in 2016 to encourage business growth, reducing compliance burdens and lowering costs for corporations.
  • Recent tax reforms in Missouri also exempt capital gains on the sale of stocks, real estate, and other assets from state income tax, making Missouri the first state to do so.
  • Changes in Missouri’s tax framework also affected local franchise fee revenue (such as cable franchise fees), which can impact community funding.

Missouri franchise tax is paid by all corporations doing business in the state. Companies required to pay the tax must file Form MO-1120 or Form MO-1120S when paying their tax bill. Missouri has been collecting franchise tax from businesses since 1970.

Paying Franchise Tax

To determine how much franchise tax needs to be paid, calculations should be based on your company's total assets or the value of outstanding and issued stock, whichever is higher. When you file, you must attach a copy of your balance sheet for the tax period concerned and any supporting documentation, such as information about your assets.

However, if your company's total assets in Missouri are less than $1 million, you do not have to pay franchise tax. Even so, you will still have to file to claim your exemption.

You should also keep in mind that your business may be able to claim certain credits to offset their tax bill.

Other corporations and small businesses that may be excluded from the tax include:

  • Industrial development authorities
  • Non-profits
  • Some electric and telecommunications companies
  • Savings and loan associations
  • Mutual insurance companies without shares

Missouri's franchise tax rate has been reduced over recent years. Some business groups want to see the tax eliminated, arguing it would help businesses grow and encourage new start-ups.

Opponents of the move point out that the state will lose revenue, which could negatively impact education and other public services.

Phase-Out and Elimination of Missouri Franchise Tax

Missouri lawmakers gradually reduced the franchise tax rate until it was fully eliminated in 2016. This policy change aimed to attract new businesses and reduce administrative burdens for corporations already operating in the state. For companies, the repeal meant significant savings on annual compliance costs, especially for those with substantial assets. While the move boosted Missouri’s business-friendly reputation, it also raised concerns about reduced state revenue that once funded public services and infrastructure.

Foreign Corporations

Foreign corporations doing business in Missouri are also subject to franchise tax.

In an important legal ruling, the state's Supreme Court found that an out-of-state corporation still has to pay franchise tax if it owns a limited partnership doing business in Missouri. According to the company, it could not have been engaged in business in Missouri because it didn't directly own any assets in the state during the period of time concerned. However, the court ruled that no matter where the company's assets were based, it made use of those assets to carry out business in Missouri. The court also ruled that the company had to prove that the state's calculation of the amount of tax it owed was false.

As a result of this court ruling, when determining whether or not your company must pay franchise tax, it makes no difference whether your company uses the state's assets directly or if a limited partnership owned by your company does business in Missouri.

New Businesses

Newly-established companies subject to franchise tax will have a filing deadline of the 15th day of the fourth month after incorporation. This means that a company using the calendar year for reporting purposes has to file and pay the tax by April 15 every year. When filing its taxes, a new business should attach its balance sheet from the day of its incorporation.

The same regulation applies to foreign corporations, which have until the 15th day of the fourth month after they start doing business in the state to file.

Extensions and Penalties

Your company can request extra time to file documentation and pay the franchise tax. To do this, you need to complete Form MO-60. In addition, a check worth 90 percent of the tax due must be included with your extension request.

Failure to file your tax return and pay the amount by the due date can result in penalties. A charge of 5 percent per month, with a maximum charge of 25 percent in total, is charged until the tax is paid. Additionally, 5 percent is added to the tax bill for the year that remained outstanding on the due date.

The additions to the tax may be avoided if:

  • At least 90 percent of the tax due was paid prior to or on the due date
  • The balance is paid prior to or on the date of the return

In addition, the state will charge interest on overdue taxes until they are paid. Beginning in 2001, the interest rate is 10 percent per annum.

If your company fails to file its franchise tax within 90 days of the original due date or within 90 days of an agreed upon extension, it will lose its charter in Missouri. This is known as administrative dissolution.

Broader Missouri Tax Reforms Affecting Corporations

In addition to eliminating the franchise tax, Missouri recently passed measures that exempt capital gains from state income tax. Starting in 2025, Missouri became the first state in the country to exempt profits from the sale of stocks, real estate, and other assets from income taxation. This development further strengthens Missouri’s competitive position for attracting investors, entrepreneurs, and corporations looking to minimize their overall tax burden.

At the same time, other franchise fee adjustments, such as those tied to local cable and utility providers, have shifted revenue streams for communities. For example, changes tied to Wayfair legislation and declining traditional cable use have reduced local government collections, making compliance audits more critical for municipalities to track and recover missing revenue.

Frequently Asked Questions

  1. Does Missouri still have a franchise tax?
    No. Missouri fully phased out its franchise tax in 2016. Corporations no longer pay this tax, though they remain subject to income and other state-level taxes.
  2. What replaced the Missouri franchise tax?
    Nothing directly replaced it. The repeal was designed to reduce corporate tax burdens, though it shifted reliance onto other revenue sources like income and sales taxes.
  3. How do Missouri’s new tax laws affect capital gains?
    As of 2025, Missouri exempts capital gains from state income tax, making it the first state to offer this exemption.
  4. Are foreign corporations still required to file in Missouri?
    Yes. Foreign corporations doing business in Missouri must still register, file income tax returns, and meet state compliance requirements, but they no longer pay franchise tax.
  5. How do franchise fee changes affect Missouri communities?
    Local governments have seen reduced revenue from cable franchise fees due to market changes and state legislation. Compliance audits are often used to identify and recover underreported fees.

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