Major Tax And Financial Incentives

A. Incentive Payments Programs

1. The Oklahoma Quality Jobs Program

This incentive program provides quarterly cash payment of up to 5% of newly created gross taxable payroll to a qualifying company. A fully executed contract with the Oklahoma Department of Commerce must be in place before any new direct job's salaries are included in the new taxable payroll. Payments are made quarterly for three years and if thresholds are achieved, they may extend for an additional seven years.

A qualified company must achieve a $2.5 million annualized payroll for the new full-time employees for any four consecutive quarters during its first 13 quarters in the program. If this payroll amount is not achieved payments cease. The payments received do not have to be paid back.

All businesses must offer basic health insurance coverage to all employees whose pay is included in the payroll figures for qualification. Initially a company has 180 days to institute a qualified basic health insurance coverage policy. Employees must be allowed access to the coverage within 180 days of employment. 80% of employees whose pay is included in the new payroll must work at least 25 hours per week. New legislation set a minimum average wage requirement based on the average county wage. Presently, however, wage requirements do not exceed $25,082 in any county regardless of average county wage. Under certain circumstances, leased employees may be included in payroll calculations.

A lower annualized payroll threshold of $1.5 million may apply to some additional applicants:
· Food processors with 75% out-of-state sales.
· Firms performing Research, Development and Testing Services as described in the NAICS Manual.
· Auxiliary Research and Development Labs of large enterprises.
· Relocations on select former military bases.

2. Small Employer Quality Jobs Incentive Act

This program provides annual cash payments to a qualifying company. The payments may reach as much as 5% of new taxable payroll and last for up to seven years. Qualifying payroll must be attributable to annual salaries that are at least 110% to 125% of the average wage of the county in which the jobs are located. Basic health insurance must be offered to new employees within 12 months, and the employer must pay at least 50% of the cost. Depending on location, at least five, and possibly as many as 15, new employees must be added in the first 12 months after the contract start date.

B. Ad Valorem Tax Exemptions

1. State Decision

New and expanding qualifying manufacturers, research and development companies, certain computer services and data processing companies with significant out-of-state sales and aircraft repair and distribution companies may be eligible for ad valorem exemptions for up to five years.

Eligible exempt property may include land, buildings, improvements, machinery, fixtures and equipment, used directly and exclusively in the primary activity or process of the qualified company located on the facility site.

2. Exempt Inventory

Oklahoma's Freeport Law exempts goods, wares, and merchandise from taxation which come from outside the state and leave the state within nine months where such goods, wares, and merchandise are held for assembly, storage, manufacturing, processing or fabricating purposes within the state.

The State constitution and statutes (68 0. S. § 2805) exempt intangible personal property from ad valorem taxation including: cash, receivables, bonds, stocks, annuities, etc. All tangible personal property is reported to the county assessor no later than March 15 of each year. A freeport exemption application must accompany the report to avoid payment of property tax. Forms are available from the County Assessor or the Oklahoma Tax Commission.

C. Sales Tax Exemptions

1. Manufacturers

Oklahoma has a comprehensive sales tax exemption for manufacturers, for which a manufacturer must have a manufacturer's sales tax permit from the Oklahoma Tax Commission. The permit must be renewed every three years. This permit must be presented to the vendor and a claim for exemption made at or before the time of purchase to relieve the vendor of the liability for collecting sales tax. The major areas covered by exemptions are tangible personal property, machinery and equipment, energy used in design, development and manufacturing.

Sales to a manufacturer of the property must be used in the manufacturing operation at a manufacturing site. The exemption is not extended to purchases used in: administration, sales, distribution, transportation, site construction or site maintenance.

2. Computer Services And Data Processing

Oklahoma recognizes the importance of certain types of service companies by increasing favorable tax treatment for companies engaged in computer services or data processing activities by offering exemptions from sales tax on certain items:

· Machinery and equipment used by persons primarily engaged in activities described in SIC Code Industrial Group Numbers 7372 and 7373 that derive at least 50% of revenues from out-of-state purchasers, or primarily engaged in activities described in SIC Code Industrial Group Number 7374 and derive at least 80% of revenues from out-of-state purchasers.
· Contact the Oklahoma Tax Commission to obtain information about filing the required affidavit. A letter of exemption will be sent to you. Presentation of the letter to vendors avoids payment of sales tax at a time of purchase.

3. Telecommunications

Exemptions apply to Interstate 1-800, WATS and private-line business telecommunication services and also cell phones sold to a vendor who transfers the equipment as part of an inducement to contract for wireless telecommunications.

D. Employee Training

1. Training for Industry

The Oklahoma Department of Career and Technology Education (Career Tech) assists qualifying businesses by paying for training for employees in newly created jobs. Training can be done at one of 54 Technology centers, including the Moore Norman Technology Center (www.mntechnology.com) here in Norman, or at the company's facility. Training agreements include instructor costs, instructional materials and other relevant training costs. Program services are determined by the number of new jobs created in targeted industries, wage rates, and benefits provided.

©2005 Oklahoma Business Incentives and Tax Information Guide