Corporate Income Tax
In most cases, a company located in Missouri will have a lower corporate tax bill than in other states. State law sets the corporate income tax rate at 6.25% of net taxable income earned by a business in Missouri. In addition, Missouri allows 50% of federal income tax payments to be deducted before computing taxable income. Using this deduction, a corporation with a taxable income of $1,000,000 would have a Missouri effective tax rate of only 5.2%. This is 7th-lowest in the nation.
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 the only state that permits companies to choose the 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.
A single state operation determines its intrastate sales and sales to non-nexus states to find the proportion of total or gross sales. A multi-state company computes these same two types of sales, and in addition, sales originating in another state and terminating in Missouri, to determine Missouri's proportion of gross sales. Using this percentage of sales and percentages of property and payroll in Missouri, an average results in a ratio that is applied to taxable income.
Single Factor Formula
The single-factor formula is based only on sales. Fifty percent of interstate sales and 100% of Missouri intrastate sales are combined. This total is then divided by gross sales to determine the apportionment percentage.
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