Understanding Oklahoma Sales and Use Taxes
Understanding and complying with the sales tax requirements in the states in which you do business is absolutely essential. More states are taxing services, as well as retail sales, so no business owner can afford to be in the dark. In addition, you may find that you are liable for use taxes for products purchased out of state. This article answers some of the basic questions regarding sales tax in Oklahoma
The Oklahoma sales and use tax rate is 4.5 percent. In addition, make sure you contact your local governments in Oklahoma because they are allowed to assess a local sales and use tax.
The Oklahoma sales tax is levied upon gross receipts derived from all sales of the following:
- tangible personal property except newspapers and periodicals
- utilities or other public service, except water, sewage, and refuse
- transportation for hire of persons by qualified common carriers
- telecommunications services that originate or terminate in Oklahoma
- printing of all kinds and most printing services
- service of furnishing rooms by hotels, public rooming houses, and tourist camps
- service of furnishing storage by auto hotels or parking lots
- food, confection, or drinks prepared by dispensers and sold for immediate consumption
- advertising of all kinds
- computer hardware or software
- dues or fees to clubs
- tickets, fees, or admission charges to recreational events
- charges made for the privilege of entering or engaging in any kind of activity when no admission is charged spectators
- charges made for the privilege of using items of recreational activity
- rental of equipment for recreational activities
- sales through vending machines
- rental or lease of tangible personal property
- floral items sold by persons engaged in florist or nursery business
- taxable services and tangible personal property sold to contractors for developing and improving real estate
- taxable services and tangible personal property sold to persons who are primarily engaged in selling their services
Leases. In Oklahoma, the lease or rental of tangible personal property resulting in the transfer of the title to or possession of the property is subject to the sales and use tax. A lease of tangible personal property is a series of transactions in time units defined by the agreement of the parties. Gross receipts are taxable at the rate in effect at the time the payment must be or is made.
Who Is Responsible for Paying Tax?
In Oklahoma, the sales tax is imposed on the consumer or user and must be paid to the vendor. Any person required to collect the sales tax is personally liable. Principal officers of corporations and managers or members of limited liability companies may be held personally liable for the sales tax owed by the corporation or limited liability company. Once the tax is added to the sales price, the tax constitutes a debt to the vendor that can be recovered in the same manner as any other debt.
Absorbing the tax is not permitted. In Oklahoma, it is against the law to refund or offer to refund all or any part of the amount collected, or to absorb the amount of sales tax required to be added to the sales price and collected from the purchaser. As a seller, it is also against the law for you to advertise directly or indirectly that you will absorb the sales tax that is required to be added to the sales price.
Oklahoma Requires Tax Permits
In Oklahoma, vendors must obtain a permit that is valid for three years for each place of business. The first permit requires a $20 fee and an additional $10 permit fee is required for each additional place of business.
Many Items Are Exempt from Tax
Oklahoma has many specific items that are exempt from sales tax. For example, certain prescription medications are exempt from Oklahoma sales tax. You'll want to check and see if you are exempt from the sales tax. An exemption certificate may be issued by a purchaser of a nontaxable item. The exemption certificate may be based on the type of transaction (such as a resale exemption) or on the item itself.
Sales Made for Resale Are Tax-Exempt
In Oklahoma, sales for resale are exempt when made to retailers, provided that it is made to a person to whom sales tax permits have been issued. You're required to provide the vendor with your sales tax permit number. In addition to furnishing your sales tax number, you must certify in writing to the vendor that you are engaged in the business of reselling the articles purchased.
Resale exemption certificate requirements. In Oklahoma, a certification for resale may be made on the bill, invoice, or sales slip retained by the vendor or by furnishing a certification letter containing the following information:
- the purchaser's name and address;
- the purchaser's sales tax permit number
- a statement that the purchaser is engaged in the business of reselling the articles purchased
- a statement that the articles purchased are purchased for resale
- the purchaser's signature (or the signature of a person authorized to legally bind the purchaser)
The above certification can be made with the Multistate Certificate or the Oklahoma Exemption Certificate, or a certification that the purchaser is engaged in the business of reselling the articles purchased can be made on the bill, invoice, or sales slip retained by the vendor. The vendor is relieved of liability for sales tax if the vendor, in good faith, accepts from you a properly completed documentation certified by the Tax Commission that the purchaser is exempt from tax.
Blanket Resale Certificates Are Permitted
Sellers may accept blanket certificates from a purchaser who repeatedly purchases the same type of property or service for processing or resale. A regular purchaser can furnish the above certification letter once, but must then notify the seller of all subsequent purchases that are not for resale and remit the tax.
Physical Presence Triggers Tax Liability
Oklahoma has a statute that specifically taxes out-of-state mail order and catalogue sellers. However, you will be responsible for paying this tax only if you have physical presence within Oklahoma. To determine if you have physical presence, ask yourself the following:
- Do I have retail facilities, a warehouse, or any office space in Oklahoma? Maintaining retail or warehouse facilities will give you physical presence. Also, having an office for employees, even for business activities unrelated to mail order sales, will give you physical presence.
- Do my employees or I enter Oklahoma for purposes of taking and transmitting orders from Oklahoma? If your employee or independent contractor goes into Oklahoma to take or transmit orders, your business may have physical presence in Oklahoma. However, contracting with a common carrier to deliver mail order goods does not constitute physical presence.
- Do my delivery vehicles frequently enter Oklahoma for purposes of delivering property? Frequent deliveries in Oklahoma by your trucks will give you physical presence in Oklahoma.
Vendors May Use Sales Tax Bracket System
The bracket system may be followed by sellers in computing the sales tax. The state of Oklahoma has issued brackets for tax rates ranging from 4.5 percent to 10.5 percent. The 4.5 percent state tax is computed on each dollar and/or fraction of a dollar according to the following table:
|Sales up to ||Tax |
|$0.11 ||no tax |
|$0.33 ||$0.01 |
|$0.55 ||0.02 |
|$0.77 ||0.03 |
|$0.99 ||0.04 |
|$1.22 ||0.05 |
|and so forth |
How to Claim Refund of Excess Payments
If merchandise is returned in exchange for another item, you may record the net difference on the sales tax report for the current month. If an item is repossessed, you can receive a credit for the unpaid portion of the account at the time of a repossession. If you have paid sales taxes through a miscomputation or misinterpretation of law, you can file a claim for refund within three years from the date of payment.
Oklahoma Imposes Use Tax on Out-of-State Purchases
An excise (use) tax is imposed on the storage, use, or other consumption in Oklahoma of tangible personal property purchased or brought into Oklahoma. The use tax doesn't apply to tangible personal property intended for use in other states, but which is stored in Oklahoma or is retained for the purpose of fabrication, maintenance or other service. The use tax is imposed directly on the person storing, using, or otherwise consuming tangible personal property purchased or brought into the state. However, property brought into the state on which a sales or use tax has been paid in another state equal to or in excess of the Oklahoma tax is not subject to tax in Oklahoma.If the tax is not paid to the vendor, the user/consumer must pay the tax directly to the Tax Commission.