There are a few key things to know before you run payroll for the first time in Oklahoma. The biggest to-dos? Registering your company with the state, reporting new hires, and getting ready to withhold the appropriate state taxes.
You’ll have federal payroll forms and requirements to think of, too, but we cover those in a different post.
With this step-by-step guide, you’ll have everything you need to process payroll in the Sooner State.
1. Register Your Company in Oklahoma
If you haven’t already, registering your company is the first step to take before you do any business in Oklahoma. (Unless you’re a sole proprietor, that is.) But if you’re a limited liability company (LLC), corporation, partnership, or nonprofit, you must register with the Oklahoma Secretary of State.
This generally takes about 15 minutes, and you’ll need to fork over $100 plus a service fee that varies based on your company structure. The good news is you can do it all online. Make sure you have a federal employer identification number (EIN) before you start.
The process includes:
- Choosing a business name: Use Oklahoma’s name availability search to see if your desired name is unclaimed. You can register your business right after that. Or, you can reserve your name for up to 60 days as you prepare to officially file.
- Deciding on a business structure: Everyone from athlete agents to LLCs to professional fundraisers must register as an entity in Oklahoma. You can see the full list here. File electronically or by downloading the appropriate form and submitting it to the office of the Secretary of State. If you aren’t sure which structure your business will take, consult with an attorney or tax accountant to avoid making any potentially costly mistakes.
You can learn more about registering your business on the Oklahoma Business Hub’s Register Your Business page. After you register your business, you’ll receive a Secretary of State filing number. Make sure you store this number in a safe place—you’ll need it throughout the life of your business.
We have a couple more important points to note before we move to the next step. First, LLCs and limited partnerships (LPs) must pay a yearly fee to stay in good standing with the Secretary of State. As of 2024, the fee is $25 for LLCs and $55 for LPs.
Second, corporations must file an annual franchise tax return and pay a franchise tax to the Oklahoma Tax Commission. This applies to all tax years before 2024. The franchise tax will no longer apply beginning in 2024.
2. Obtain the Relevant Licenses and Permits
Depending on your business structure, you may need to apply for certain permits and licenses to legally do business in Oklahoma.
For example, if you plan to sell products, you must obtain a Sales or Use Tax Permit from the Oklahoma Tax Commission.
Certain service-based businesses don’t require any state permits or licenses. Think lawn care, housekeeping, repairs, and some business services. But counties and municipalities within Oklahoma might still require you to get a license for this type of business. Check your city and county laws before checking this step off your list.
Other businesses will always require you to get a permit or license. A home health care or home sitter business, for instance, must obtain a license from the Oklahoma State Department of Health.
And if you want to open a restaurant that sells alcohol, you’ll need to get several licenses and permits:
- A food establishment license
- Food handler’s permits for employees
- Various liquor licenses from the Alcohol Beverage Laws Enforcement Commission (ABLE)
You can explore the Oklahoma Business Hub’s Obtain Licenses and Permits page to see if you need any special certificates.
Just make sure you have your EIN and Secretary of State filing number in hand before you obtain any permits. You’ll need them both.
3. Set Up State Tax Payment Accounts
As an employer in Oklahoma, you’ll be responsible for withholding or paying (or both) three different state payroll taxes:
- State income tax
- Unemployment insurance tax
- Worker’s compensation insurance
Let’s expand on each one.
Oklahoma levies a graduated income tax that ranges from 0.25% to 4.75% of a person’s income. The exact rate depends on a person’s filing status, income, and other factors. Employers must withhold these taxes from their employees’ paychecks.
To do this, you’ll need to create an Oklahoma income tax withholding account with the Oklahoma Tax Commission (OTC). The deadlines for remitting (paying) these taxes to the state depend on the amount withheld:
- Quarterly payments: $500 or less per quarter
- Monthly payments: $501 or more per quarter
- Twice-weekly payments: $10,000 or more per month
In addition, you’ll need to file wage reports each quarter for all your employees.
Luckily, the Sooner State makes it easy to do all of this online. Once you have a tax withholding account with the OTC, you can do everything via the OTC’s Oklahoma Taxpayer Access Point (OKTAP) portal.
Now we’ll move on to unemployment insurance payments. The state maintains the Oklahoma Unemployment Insurance Trust Fund, which is what your tax payments will go into.
To manage these payments, you’ll register with the Oklahoma Employment Security Commission (OESC). If you’re a new employer, the department will assign you a new employer tax rate of 1.50% on the first $27,000 of each employee’s wages.
After that, you’ll get a rate between 0.3% to 9.2% based on your quarterly wage reports, along with the state’s current experience and conditional factors.
Employers can make payments through the EZ Tax Express portal. Learn more on the OESC’s Employers page.
Finally, most employers must provide their employees with worker’s compensation insurance. This insurance covers medical care, rehabilitation, and disability benefits for employees injured at work.
You can either buy your worker’s comp insurance from a private insurance company or use CompSource Mutual Insurance Company.
Depending on what type of business you run, you may also need to withhold sales or use tax. If you’re a wholesaler or a retailer, you’ll charge and remit those taxes using your sales tax permit (STP) number. The sales tax rate in Oklahoma is 4.5%. Other businesses may need to collect sales tax, too. Learn more about Sales and Use Tax in the Sooner State.
4. Figure Out Local Tax Responsibilities
Along with sales tax requirements, counties and municipalities can charge various taxes too. These are often lumped together with the state sales and use tax.
Take the City of Tulsa, for instance.
If you live within Tulsa city limits and operate a business there, you’ll be responsible for collecting and remitting an 8.517% sales and use tax. The percentage is divided as follows:
- 4.5% to the State of Oklahoma
- 0.367% to Tulsa County
- 3.65% to the City of Tulsa
The overall rate will look different if you do business in Oklahoma City, which is located in Oklahoma County. Or if you’re based in Broken Arrow, a city in both Tulsa and Wagoner counties.
Check out the full list of Oklahoma cities and counties that charge sales and use tax. As long as you research and understand the rates and due dates that apply to your business location, you’ll be fine.
5. Report New Hires
Now that you’ve got all the business formation and tax stuff sorted, it’s time to hire that first employee. This step comes with a big, important to-do—one you’ll have to repeat each time you hire or rehire an employee: new hire reporting.
The federal government requires all employers in the United States to report new hires to their state governments. These reports help states enforce child support payments. They also help reduce unemployment insurance fraud.
In Oklahoma, all hires must be reported to the Oklahoma Employment Security Commission (OESC) within 20 days of the employee’s official start date.
Here’s what you need to include in each report:
- Employee name, address, and Social Security number (SSN)
- Employer name, address, and federal employer identification number (FEIN/EIN)
- Employee’s official start date
- State of hire
To avoid future paperwork requests, you can also provide:
- Employer’s Oklahoma Employer Account Number (assigned by OESC)
- Employee’s occupation and salary
- Employee’s date of birth
- An answer on whether dependent health insurance is available
- An answer on whether the employee is still employed with your company
- Recall (rehire) date
You can report all new hires on the Oklahoma Employer New Hire Reporting System portal.
The Best Way to Run Oklahoma Payroll
Now that you know the five steps to take before you run payroll in Oklahoma, it’s time to tackle the task itself.
It might feel daunting. That’s because it is—if you try to do it on your own. And we strongly advise you don’t try to do that. Remember, you don’t just have all these state and local payroll taxes to pay and rules to follow to stay compliant. There’s also the federal side of things to worry about.
Here’s the thing: we no longer live in the pen-and-ledger age, or even the Excel spreadsheet age. Instead, we live in the best age yet when it comes to running payroll: the do-it-for-you payroll software services age.
You heard us right. A top-notch payroll software service can take the biggest payroll tasks off your hands. One of our favorites—Gusto—can:
- Automatically file and remit your state, local, and federal taxes for you
- Organize and store all your important tax forms
- Stay on top of changing tax rates and update your taxes accordingly
- Automatically calculate and sync things like hours worked and PTO accrued
- Register you to pay taxes in all 50 states—a game changer if you have a remote team spread out across the country
In other words, when you use a payroll software service to run payroll in Oklahoma or anywhere else, you’ll save hours of frustration and confusion. Get started today with one of our favorite payroll software services.
