In the poetic words of Shawn Carter, also known as Jay-Z, “I’m not a businessman. I’m a business, man.” For many Oklahomans, their business is more than just their job – it represents their livelihood, identity and sometimes even legacy. When starting a business, one may concentrate on products, services, staffing, strategy or logo design. While important, those details become futile if the business runs afoul of basic state tax laws and procedures. Although often mundane, tax compliance is vital to the success and longevity of any business.

The intricate and technical nature of tax and business guidelines can deter even the most motivated business professionals. Reducing tax and business material to smaller, bite-sized pieces may make it more palatable. Accordingly, this article primarily covers the early stages of business ownership – specifically, the registration process.

BUSINESS REGISTRATION

Every business requires a solid foundation; truly, a laundry list of details must be carefully finalized before opening any business. Registering the business with the Oklahoma Tax Commission (OTC), specifically, is a crucial step. Registration is, in simple terms, the process a business must follow to obtain OTC permission to operate. Proper registration will prevent compliance issues for businesses later. Registration applications can be submitted via OkTAP.[1] Applicants should be prepared to provide several key pieces of information, some of which are described below.

Business Structure[2]

Selecting a business structure is no small component of the business registration process. A business’s entire fiscal trajectory – as well as that of its officers – can be heavily impacted by business structure alone. Sole proprietorships, partnerships and corporations each vary in distributions (i.e., of profits and taxes), legal protections (primarily referring to officer liability), as well as required filings and documentation. On top of that, there are subtypes for each structure that can also differ substantially. The main tax takeaway in this is that business structure can greatly impact not only what is taxed but also who is liable for that tax. Since businesses are required to select a structure during the registration process, the following are descriptions of some of the most common business structures.[3]

Sole proprietor. A business that is owned by a single individual and is often considered the simplest of business structures. Liquor stores are frequently organized as sole proprietorships due to legal restraints, and this structure is also commonly used by self-employed and home-based individuals. In terms of liability, the sole proprietor and the business owner are one and the same, meaning the sole proprietor/business owner is liable for all debts and liabilities but also entitled to all profits and gains. Sole proprietor filing requirements are also among the most basic of business structures. No separate business income tax return is required because such information would be provided with the sole proprietor/business owner’s individual income tax return. Likewise, the OTC does not require sole proprietors to file an annual report.

Partnership. An association of two or more persons carrying on as co-owners of a business for profit.

A general partnership involves agreeing with one or more individuals to jointly own or share the profits of a business. There is no limit on the number or type of partners (individuals, other partnerships or corporations).

A limited partnership consists of one or more general partners (those who are generally liable for the business) and one or more limited partners (those who have limited liability), and it must file organizing documents with the secretary of state.

While still relatively simple to organize, a partnership allows for multiple owners as opposed to a sole proprietorship, and its substructures provide more flexibility in allocating liability between individuals and the entity. Attorneys often choose partnership structures for their practices.

Corporation. A separate legal entity with rights, privileges and liabilities distinct from those of an individual. Operating as a corporation may offer tax or financial advantages; however, these benefits may be offset by additional considerations, such as higher licensing costs or reduced personal control. Corporations may be organized for either for-profit or nonprofit purposes.

In C corporations, income goes to the corporation. Dividends are paid to the stockholders.

In Sub S corporations, income is taxed like a partnership. Income and expenses are divided among shareholders who report on individual income tax returns. A Sub S corporation can be formed by filing IRS Form 2553 within 75 days of the creation date.

Proponents of the corporation structure enjoy its facilitation of efficient management, as well as the life of a corporation being perpetual, stockholders have limited liability and that selling stock is relatively simple. There are also some unique constraints under the corporation structure, such as special taxation, higher organization costs, possible limitations on the type of business activities and that it is subject to both state and federal rules.

Limited liability company (LLC). A hybrid business structure that combines features of corporations and partnerships, offering the advantages of a partnership while providing limited personal liability for its members. Like sole proprietorships, a single person may qualify for LLC status, and like corporations, LLCs are perpetual. They also offer flexible taxation options, as a one-member LLC is typically taxed as a sole proprietorship, and an LLC with two or more members is taxed as a partnership. While many business structures have uniform (or very similar) guidelines from state to state, LLCs can vary greatly depending on the state of incorporation. Certain entities – such as nonprofits, banks and insurance companies – cannot qualify for LLC status. No member is liable for debts and liabilities of another LLC member; however, officers may still be liable for trust fund taxes incurred by the business.[4] This means that officers can be sued by the OTC in certain circumstances when taxes are owed by the business.

Identifying Tax Types

There are numerous types of taxes, and each different business can have different filing requirements. The type of tax(es) a business is required to pay depends on 1) the business structure, 2) what types of goods and/or services the business provides and 3) how the business is staffed. The business is required to register an account with the OTC for each tax type. For instance, one business can hold accounts for sales, withholding and mixed beverage tax. From there, a single business can manage each of these tax type accounts through its OkTAP profile. The following are the most common tax types.[5]

Income taxes. Taxes paid on net income (after the cost of goods and deductions are taken out). Estimated income taxes may be required quarterly, with tax returns filed annually and payments made throughout the year using estimated tax forms. While it is well-known that Oklahomans are required to file individual income tax (IIT), many do not realize that business entities must also pay income tax (for example, corporate income tax (CIT)). Individual income tax returns typically do not have much bearing on businesses; however, sole proprietors are required to remain current on individual income tax obligations for their business to remain in good standing.

Self-employment taxes. Social Security tax for self-employed people. A Federal Insurance Contributions Act (FICA) tax of 15.3% is paid on quarterly federal Form 1040-ES. This often applies to sole proprietorships, farming businesses, partners and LLCs.

Employment taxes. This includes federal and state employee income withholding taxes as well as federal and state unemployment taxes.

Income tax withholding refers to federal income tax and Social Security tax that are withheld from employee paychecks paid by employers through bank deposit. State income withholding tax is also withheld from employee paychecks and paid by employers to the OTC.

Social Security tax (FICA) is shared between employers and employees, with each responsible for one-half of the tax (7.65% is withheld from employee paychecks, and 7.65% is withheld as a business expense).

Unemployment tax is generally required of most Oklahoma employers, who are required to pay a tax to the Oklahoma UI Trust Fund for temporary income or benefits to eligible unemployed claimants.[6] Employers pay all this tax quarterly, and it is considered a business expense.

Wage withholding taxes. Withholding tax is the amount an employer withholds from employees’ wages and pays directly to the state. The amount withheld is a credit against the income taxes the employee must pay during the year. Income tax withholding schedules provide graduated tax rates to be withheld by employers each pay period. The frequency at which a business should remit withholding payments to the OTC depends on the amount per quarter a company withholds. If a company withheld more than $500 for the quarter, it must remit monthly. If a company withheld less than $500 for the quarter, it must remit quarterly. In the event that a business withheld $10,000 or more in a month, it must remit twice per week. Typically, however, wage withholding returns are due quarterly. Payments are remitted to the OTC throughout the quarter on the same schedule that the employer remits payments to the IRS. Employers can access yearly Oklahoma Income Tax Withholding Tables to determine withholding computations.[7]

It is important to note that passthrough wage withholding (WTP) is related to wage withholding (WTH) but is a distinct tax type. Pass-through entities include S corporations (as described under the Internal Revenue Code (IRC)), general partnerships, limited partnerships, limited liability partnerships, trusts and limited liability companies (only those that are not taxed as corporations for federal income tax purposes pursuant to 68 O.S. §2385.29). Pass-through entities do not include entities disregarded for income tax purposes under the IRC.[8]

Excise taxes. Sales and use taxes on consumed items. A common example of excise tax in Oklahoma includes the fees collected when registering a vehicle or boat.[9]

Sales tax (STS) is charged and collected on all transfers of title or possession of tangible personal property occurring within the state, as well as on certain services. It is due on the 20th of each month and is based on the point of delivery (where the buyer receives the item or service). Sales tax varies by location, is calculated as total tax = state + city + county, and is subject to the four-digit COPO code for each city/county when filing returns. Common businesses subject to sales tax include retail stores, restaurants, mobile vendors, resale shops, online sellers, wholesalers, vehicle parking and storage facilities. Additionally, HB 1955, otherwise known as the “grocery tax” bill, reduced the state sales tax rate on food and food ingredients. This typically only applies to the state portion of sales tax charged on food and food ingredients purchased at a grocery store.

Use tax (STU) is imposed on tangible personal property purchased and brought into Oklahoma for storage, use or consumption. If the property is brought into a county or municipality that also levies a use tax, the applicable county or municipal use tax must also be paid. Retailers maintaining a place of business within the state and/or making sales from a place of business outside the state for use in Oklahoma are required to collect the appropriate state and local use tax from the customer. Businesses that register for use tax accounts include those that purchase from out-of-state vendors.

Business personal property taxes. Assessments on furniture, fixtures, machinery, equipment and inventory, with statements mailed by the applicable county assessor. Payments are due between Jan. 1 and March 15 using OTC Form 901 Business Personal Property Rendition. Potentially significant penalties apply if payment is received after March 15.

Motor fuel tax. A tax that is precollected when the fuel is removed from the terminal. The tax is then included in the cost of motor fuel to the consumer. Taxpayers who pay motor fuel tax should typically hold a motor fuel permit (MFP).

Franchise tax (FRX). Applicable to corporations that do business in Oklahoma. Corporations are taxed $1.25 for each $1,000 of capital invested or used in Oklahoma. Tax year 2023 was the last year that FRX returns were required to be filed. Starting with tax year 2024, there is no Oklahoma franchise tax filing requirement. In previous years, taxpayers have often elected to file CIT and FRX simultaneously with a combined form.

Gross production tax (GPX). Tax collected on the production of oil and natural gas produced in Oklahoma.

Mixed beverage tax (ATG). The 13.5% tax is charged on the sale of liquor, wine and beer.

Medical marijuana tax (MMJ). The state (and county and municipal, if applicable) tax applied to sales of medical marijuana products. Payments for MMJ can only be made in cash.

Lodging tax (STH). The state (and county and municipal, if applicable) tax applied to stays at hotels, Airbnbs and other lodging locations.

Obtaining Permits and Licenses

Once questions surrounding business structure and required tax types are resolved, business owners should obtain any necessary permits. Oklahoma statutes allow exemptions under certain conditions. Additionally, businesses must obtain OTC permission to legally carry out certain types of operations. These exemptions and permissions are facilitated through permits. Licenses are similar – most commonly in Oklahoma, they authorize business owners to purchase, import and sell products, such as alcohol. There is a long list of permits and licenses available, but the following are the most common.[10]

Sales tax permit. Sales tax permits must be obtained before making taxable sales and allow businesses to legally collect and remit sales tax to the OTC. The permit ensures compliance with state and local tax laws and allows businesses to purchase inventory tax-free when intended for resale. However, it cannot be used to purchase supplies, fixtures or equipment used in the business. As a rule of thumb, businesses should collect tax on the gross receipts of every sale unless presented with documented proof of exemption. Sales tax permits can be applied for through OkTAP.

ABLE license. All Oklahoma business owners who seek to sell alcohol must first obtain a license from the Oklahoma Alcoholic Beverage Laws Enforcement (ABLE) Commission. One can apply for a business ABLE license through the ABLE online portal. The portal, as well as the ABLE website itself, provides information on all required forms, costs and prerequisites required for a mixed beverage license.

Special event permits. Required for entertainment, amusement, recreation or marketing events that occur at a single location on an irregular basis and at which tangible personal property is sold. Any business seeking this type of permit must submit an application for a special event permit with the Business Tax Services division of the OTC no less than 20 days before the special event.[11]

Permits, licenses and/or decals may be required for other nonstandard businesses, such as online businesses, vending machines and food trucks or mobile businesses.

ADDITIONAL INFORMATION

The work is certainly not done after getting the business up and running. Business owners must remain diligent in following current requirements as well as monitoring changes in the law. Specifically, business owners must keep up with:[12]

• Timely filing and paying reports and returns
• Timely renewing and posting permits and licenses
• Contacting the OTC (and other entities as appropriate, such as the secretary of state) with any changes or updates (g., address and officer changes)
• Ensuring the business follows the current statutes, rules and laws; they sometimes change year to year, so careful monitoring is important

Additionally, all loose ends must be addressed before stepping away from the business. Failing to do so may result in monetary penalties, barred successor operations and even legal action. Some things to consider when closing a business include:[13]

• Identifying a close date. Without a close date, the business technically continues to operate in the OTC system, which can result in an additional balance owed.
• Gathering supporting documentation. When a business closes, the OTC requires documentation verifying the date of closure to officially close the account.
• Contacting regulatory authorities and agencies as appropriate. For example, the secretary of state should be updated whenever a business decides to cease operations.
• Resolving current account deficiencies. Failing to pay off an outstanding liability will sometimes cause successor liability issues – meaning anyone who purchases the business cannot operate until the liability is resolved.

CONCLUSION

Starting a new business can be daunting, but it is certainly not impossible. There are numerous resources available online for taxpayers with business tax questions, including:

• List of state agencies[14]
• Oklahoma Statutes[15]
• Title 710 of the Oklahoma Administrative Code[16]
• OTC website[17]

The bottom line is this: All businesses have rules and regulations that govern them. A full understanding of these guidelines at the beginning of the registration process is critical to the longevity of any business. Again, a strong foundation will almost always provide any business with a better chance of success.

Author’s Note: This article serves as the author’s explanation of concepts, guidelines, laws and regulations based upon her professional experience and preferred informational materials on the topic. This is not an official publication of the Oklahoma Tax Commission.

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ABOUT THE AUTHOR

Marina Wise is an assistant general counsel at the Oklahoma Tax Commission’s Tulsa office. Ms. Wise was born in Brownsville, Texas, and earned her bachelor's degree from Austin College before graduating from the TU College of Law in 2021. Her practice is centered on business tax compliance and collection, as well as bankruptcy. She covers cases in all Oklahoma district courts as well as the bankruptcy courts for Oklahoma’s Northern and Eastern districts.

 

 

 

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ENDNOTES

[1] New Business Registration, Oklahoma Tax Commission OkTAP, https://bit.ly/4cGY236.

[2] For conciseness purposes, endnote 3 contains the sources used multiple times for much of the information contained in this section. Additional endnotes will be used for sources only used for specific lines.

[3] See 18 O.S. §1005 et seq.; see 54 O.S. §1-202 et seq.; see New Business Workshop, Oklahoma Tax Commission, https://bit.ly/4msiEQ1; see “Businesses,” Oklahoma Tax Commission, https://oklahoma.gov/tax/businesses.html; see “Choosing a Business Structure,” Oklahoma Department of Commerce https://bit.ly/4swP6lw; see also “Choose a Business Structure,” U.S. Small Business Administration https://bit.ly/4sCiEhL; see 3A Vernon's Okla. Forms 2d, Bus. Org §§1.03, 1.04.

[4] See 68 O.S. §253.

[5] See supra notes 2-3 and accompanying text.

[6] See “Employers,” Oklahoma Employment Security Commission (https://bit.ly/4tJNANU).

[7] 2026 Oklahoma Income Tax Withholding Tables, Oklahoma Tax Commission (Rev. November 2025), https://bit.ly/4mxxqoM.

[8] See Okla. Admin. Code §710:90-3-11(b)(3-4).

[9] See “Fees & Exemptions,” Service Oklahoma, https://bit.ly/4ss72xF.

[10] New Business Workshop, supra; Licensing, Oklahoma ABLE Commission, https://bit.ly/4sAADoB.

[11] See Okla. Admin Code §710:65-9-8.

[12] See supra notes 2-3 and accompanying text.

[13] See also “Entity Changes,” Oklahoma Business Hub, https://bit.ly/4sAqgkW.

[14] “State Agencies,” State of Oklahoma, https://oklahoma.gov/stateagency.html.

[15] See generally 68 O.S. §§101 et seq.

[16] See generally Okla Admin Code §§1-1-2 et seq.

[17] See generally Oklahoma Tax Commission, https://oklahoma.gov/tax.html.