Missouri has some of the most business-friendly income taxes in the Midwest. C corporations pay a flat 4%, individuals pay a top rate of 4.7% and, from 2025, capital gains are fully exempt from state income tax. LLCs have no annual report requirement. The trade-offs are relatively high local sales taxes and 1% earnings taxes in Kansas City and St. Louis.
This guide explains Missouri's business taxes for 2026, with worked examples and comparisons with its eight neighbors.
Missouri business taxes at a glance
A Missouri C corporation pays a flat 4% on profit and can deduct half of its federal income tax before calculating state tax. Pass-through owners pay graduated rates that reach 4.7% at less than $10,000 of taxable income, so most owners effectively pay a flat 4.7% on business profit. Owners who sell a business pay no state tax on the capital gain. Customers pay a 4.225% state sales tax plus local taxes that often push the combined rate above 8%. LLCs pay $50 to form online and nothing afterward, while corporations file a $20 annual report. Businesses in Kansas City and St. Louis also pay a 1% earnings tax.
Corporate income tax
| Item | 2026 |
|---|---|
| Corporate income tax rate | 4% flat |
| Federal income tax deduction | 50% of federal income tax paid |
| Franchise tax | Repealed from 2016 |
- Apportionment: Single sales factor for most corporations.
- Combined reporting: Missouri does not require combined reporting; affiliated groups may file consolidated returns.
- Credits: Missouri Works for job creation, research credits for qualifying industries and historic preservation credits.
- Returns: Form MO-1120 is due on the 15th day of the fourth month after year-end.
The federal income tax deduction lowers the effective Missouri rate. A corporation paying $98,000 of federal tax can deduct $49,000 before calculating Missouri tax, saving about $1,960.
Personal income tax and pass-through owners
| Taxable income (2026, approx.) | Rate |
|---|---|
| $0 to $1,348 | 0% |
| $1,348 to $2,696 | 2% |
| $2,696 to $4,044 | 2.5% |
| $4,044 to $5,392 | 3% |
| $5,392 to $6,740 | 3.5% |
| $6,740 to $8,088 | 4% |
| $8,088 to $9,436 | 4.5% |
| Over $9,436 | 4.7% |
- Capital gains: From 2025, individuals deduct 100% of federally reported capital gains, including gains on sales of business interests and real estate.
- Federal tax deduction: Individuals can deduct a limited amount of federal income tax, phased out at higher incomes.
- Future cuts: Revenue triggers allow the top rate to fall in steps toward 4.5%.
- PTE election: Partnerships and S corporations can elect to pay tax at the entity level, deductible federally.
Local earnings taxes
| City | Earnings tax | Payroll expense tax |
|---|---|---|
| Kansas City | 1% of wages and business net profits | None |
| St. Louis | 1% of wages and business net profits | 0.5% of payroll |
Both taxes must be renewed by voters every five years. They apply to residents of the cities and to nonresidents who work there. Businesses in the cities file net profits returns and withhold tax from employees.
Sales and use tax
| Component | Rate |
|---|---|
| State sales tax | 4.225% |
| Local taxes (city, county and special districts) | Typically 3% to 6% |
| Average combined rate | About 8.44% |
- Groceries are taxed at a reduced state rate of 1.225% plus local taxes.
- Community improvement and transportation development districts can add taxes in shopping areas, so rates vary within a single city.
- Remote sellers with more than $100,000 of Missouri sales must collect. Missouri was the last state to adopt economic nexus, in 2023.
- Most services are not taxed.
Payroll and property taxes
- Unemployment insurance: Employers pay on the first $9,500 of each employee's wages. New employers start at 1% to 2.7%.
- Property tax: Commercial real property is assessed at 32% of market value, and business personal property at 33.3%. Missouri also has a commercial surcharge in some counties that replaced an old merchant and manufacturer tax.
Forming a business in Missouri: fees and ongoing costs
| Item | LLC | Corporation |
|---|---|---|
| Formation filing fee | $50 online ($105 by mail) | $58 minimum (based on shares) |
| Annual report | None required | $20 online |
| Franchise tax | None | Repealed |
| Registered agent | Required | Required |
Worked example: $500,000 of profit
| Step | Amount |
|---|---|
| Taxable income | $500,000 |
| Missouri corporate tax at 4% (before federal tax deduction) | $20,000 |
| Federal tax at 21% on $480,000 | $100,800 |
| Total income tax | $120,800 (24.2%) |
After the 50% federal income tax deduction, actual Missouri tax would be about $2,000 lower. For a single LLC owner with $150,000 of Missouri taxable income, state tax is about $6,869. At $75,000 it is about $3,344. A Kansas City resident would add about $1,500 of earnings tax at $150,000.
How Missouri compares with its neighbors
Missouri's 4% corporate rate is the lowest among its neighbors with a corporate income tax, tied with Oklahoma. In the Kansas City metro area, Missouri and Kansas compete directly for businesses, and the Kansas side has higher income taxes but no city earnings tax.
Choosing an entity in Missouri
- LLC: $50 to form, no annual reports and pass-through taxation at up to 4.7%.
- S corporation: Same personal rate, with federal payroll tax savings.
- C corporation: 4% state tax plus 21% federally, with the federal tax deduction reducing the state bill.
Because Missouri exempts capital gains, owners planning to sell their businesses may find that the state tax on a sale is zero whether they use an LLC, S corporation or C corporation. Structure still matters federally.
Who pays the most in Missouri
Businesses in Kansas City and St. Louis carry an extra layer of tax through the 1% earnings tax, plus the 0.5% payroll expense tax in St. Louis. Retailers in special taxing districts collect some of the highest combined sales tax rates in the region. Property tax on business equipment applies statewide. Outside the two big cities, however, Missouri's income taxes are among the lowest in the Midwest.
Tax planning tips for Missouri businesses
Plan a business sale with the capital gains exemption in mind. Missouri residents now pay no state tax on capital gains. An owner thinking about relocating before a sale should consider that moving to Missouri, rather than away from it, may lower state taxes.
Check special taxing districts. If you sell from a location in a community improvement or transportation development district, make sure your point-of-sale system charges the district tax.
Watch the city line. Locating just outside Kansas City or St. Louis avoids the earnings tax on business profits, though employees who live in the cities still owe it.
Recent changes for 2025 and 2026
- Capital gains fully deductible for individuals from 2025.
- Top personal rate at 4.7%, with further cuts possible.
- Remote seller rules in effect since 2023.
- Earnings taxes in Kansas City and St. Louis renewed by voters.
Is Missouri a good state for business?
Advantages
- 4% corporate rate and low personal income tax
- No state tax on capital gains
- No annual reports for LLCs
- Central location and low cost of living
Drawbacks
- High combined sales tax rates in many areas
- 1% earnings taxes in Kansas City and St. Louis
- Property tax on business equipment
- Complex local sales tax districts
Compliance checklist
- File Articles of Organization or Incorporation with the Secretary of State.
- Register with the Department of Revenue for sales tax, withholding and income tax.
- Register with Kansas City or St. Louis for earnings tax if applicable.
- Register with the Division of Employment Security if you hire.
- File the corporate annual report if you operate a corporation.
- File Form MO-1120 or MO-1065 each year.
Compare Missouri with its neighbors below or estimate your taxes in the United States calculator. See LLC taxes for more.