Freedom OK Sales Tax:
What Businesses Must Know

Sales tax range in Oklahoma

In 2024, sales tax rates in Oklahoma saw adjustments across various municipalities compared to 2023. The state maintains a base Oklahoma sales tax rate of 4.5%, which remains unchanged from 2023. However, local tax rates, which are set by municipalities and counties, experienced variations, impacting the overall Oklahoma state sales tax burden.

In 2024, adjustments to the sales tax rates in Oklahoma affected not only general goods but also car purchases. Despite the state rate remaining at 4.5%, local increases, particularly in urban areas like Oklahoma City, have made it essential for buyers to use resources like the Oklahoma sales tax calculator. This tool helps in determining the comprehensive car sales tax that includes both state and local components.

Overall, while the state sales tax remains at 4.5%, local variances are evident as cities adjust their rates to align with fiscal policies and community needs. Comparing 2023 to 2024, changes were modest with minor increases or stabilization reflecting economic strategies tailored to local circumstances.

Changes to Oklahoma Tax Rates

Oklahoma City: In 2023, Oklahoma City's sales tax rate was 8.625%. In 2024, this rate increased slightly to 8.75%, reflecting city budget demands for infrastructure improvements.

Tulsa: Tulsa maintained a steady rate of 8.517% from 2023, with no changes reported in 2024, making the Tulsa OK sales tax simpler for budgeting purposes. The city opted to keep its rates stable to maintain economic consistency for businesses and consumers.

Norman: Norman saw a marginal drop from 9% in 2023 to 8.95% in 2024. This reduction was part of a city initiative to foster local retail growth.

Broken Arrow: Broken Arrow's rate remained at 8.417% from 2023 to 2024, following a city council decision to keep the tax rate fixed due to adequate budget surpluses.

Lawton: Lawton increased its sales tax rate from 8.625% in 2023 to 8.75% in 2024. The increment was approved to fund public safety and community service programs.

Calculating Oklahoma sales tax

Identify the Purchase Type

Goods: Tangible personal property

Services: Labor or professional services

Digital Goods and Software:

• E-commerce: Online sales of physical products
• SaaS: Software as a Service
• When accounting for digital goods, utilizing an Oklahoma sales tax calculator can simplify compliance. As the state now includes digital goods and services in its taxable base, accurately calculating tax on these items is crucial. The calculator's ability to factor in both base and local tax rates ensures you're meeting all tax obligations accurately and efficiently.

Determine the State Sales Tax Rate

Base State Sales Tax Rate: 4.5%

Identify Local Sales Tax Rates

County and City Rates: Vary by location. Check specific rates for the county and city where the transaction takes place

Calculate the Total Sales Tax Rate

Goods and Services: Add state rate (4.5%) to applicable county and city rates

E-commerce: Use destination-based sourcing; calculate tax based on where the purchaser receives the product

SaaS: Generally subject to the same rate as tangible goods; check for specific local exemptions or additions

Other Services: Service sales may have different tax implications; verify if exempt or taxable based on state guidelines

Compute the Sales Tax Amount

Multiply the total sales tax rate by the price of the item/service

Examples

Physical Retail Purchase: $50 item x (State Rate 4.5% + Local Rate 3%) = $50 x 7.5% = $3.75 tax

Online Purchase: $100 item delivered to Tulsa (State Rate 4.5% + Tulsa Rate 3.65%) = $100 x 8.15% = $8.15 tax

SaaS Subscription: $200 service x (State Rate 4.5% + Local Rate 2.0%) = $200 x 6.5% = $13 tax

Recent changes to Oklahoma sales tax

In 2024, Oklahoma implemented several changes to its sales tax policies, aimed at addressing economic shifts and enhancing state revenue.

General Sales Tax Rate: The general state sales tax rate increased from 4.5% in 2023 to 4.75% in 2024, following new legislation. This measure took effect on January 1, 2024, to boost state funding for education and infrastructure projects.

Expansion of Exemptions: Exemptions for certain essential goods were expanded. In 2023, only groceries and prescription medications were exempt from sales tax. Starting March 1, 2024, diapers, feminine hygiene products, and over-the-counter medications were also included in the exemption list, reflecting a growing emphasis on healthcare and basic needs.

Inclusion of Digital Goods and Services to Base Rate: Oklahoma broadened the base for its sales tax to include digital goods and services. Previously, digital downloads and streaming services were not taxed. Effective July 1, 2024, these items became subject to the standard sales tax rate, aligning with trends in other states and recognizing the increasing consumption of digital products.

Lowered Threshold for Remote Sellers: The threshold for remote sellers to register and collect Oklahoma sales tax was lowered. In 2023, remote sellers had to collect sales tax if their annual sales exceeded $100,000. From October 1, 2024, the threshold was reduced to $50,000, aiming to capture more revenue from out-of-state businesses benefiting from the Oklahoma market.

Greater Flexibility for Local Municipalities: Local municipalities were granted greater flexibility to adjust their local sales tax rates under recent legislation, impacting sales tax OKC OK. While municipalities in 2023 could increase their local sales tax up to a maximum of 5%, a new regulation effective on September 1, 2024, allows them to propose and vote on increases up to 6%, enabling local governments to meet specific funding needs.

Understanding origin vs. destination sales tax collection

Oklahoma employs a modified origin-based sales tax collection system.

In this system, the sales tax rate applied to a transaction is determined by the location of the seller, but the local sales tax revenue is distributed based on the location of the purchaser. This means that while the base state sales tax rate is consistent across Oklahoma, additional local sales taxes reflect the purchaser's location.

For more detailed information, you can refer to the Oklahoma Tax Commission: https://oklahoma.gov/tax.html

Taxable products in Oklahoma

In the state of Oklahoma, various product categories are subject to sales tax. Here's an overview of the types of products that typically incur sales tax:

Tangible Personal Property

Generally, any physical items you can move, touch, or feel are subject to sales tax. This includes:

• Clothing and footwear
• Furniture and home goods
• Electronics (like TVs, computers, and smartphones)
• Appliances (such as refrigerators, dishwashers, and microwaves)
• Automobile parts and accessories

Prepared Food and Beverages

Items sold in restaurants, cafes, and other food service establishments are typically taxable. This includes:

• Meals, snacks, and beverages prepared for immediate consumption
• Catering services

Certain Services

Some services are also subject to sales tax, including:

• Admission fees for entertainment events (e.g., movies, concerts, sporting events)
• Amusement park and recreational facility admissions
• Personal care services (such as haircuts and tanning)
• Repairs and maintenance services for tangible personal property

Utilities

In many cases, residential and commercial utilities may also be subject to sales tax. This includes:

• Electricity
• Natural Gas
• Water
• Telecommunication services

Digital Goods

Sales tax may apply to digital goods and services in Oklahoma, including:

• E-books
• Digital music
• Streaming services
• Downloaded software and apps

Is SaaS taxable in Oklahoma?

In Oklahoma, SaaS (Software as a Service) is generally considered taxable as it falls under the category of prewritten software, which is subject to sales tax. The state's tax regulations treat the access and use of software on a subscription basis as a taxable service despite it being delivered electronically.

Are digital products taxable in Oklahoma?

In Oklahoma, as of 2024, digital products are generally taxable.

This includes digital goods like software, e-books, and downloadable music or videos. Consumers purchasing these items need to pay state sales tax, which applies to both physical and digital products to ensure consistent revenue from sales transactions.

Are services taxable in Oklahoma?

In Oklahoma, most services are generally not subject to sales tax.

However, certain services, such as those related to tangible personal property, utilities, and specific professional services, may be taxable.

Physical nexus

In 2024, Oklahoma's physical nexus requirements for sales tax largely mirror those from 2023, with specific enforcement focusing on tangible presence within the state. Below is a condensed comparison of the key points for each year:

Maintaining a physical location (store, warehouse, office)

2023: Any physical location in Oklahoma established nexus. 2024: Continues to establish nexus.

Ownership or lease of real or personal property

2023: Ownership or leasing of property within Oklahoma triggered nexus. 2024: Retains the same criteria.

Presence of employees

2023: Having employees working in the state created nexus. 2024: Employee presence still confirms nexus.

Installation or assembly services

2023: Performing installation, assembly, or maintenance services established nexus. 2024: Criteria unchanged.

Delivery of goods in company vehicles

2023: Company vehicles delivering goods within Oklahoma established nexus. 2024: Delivery vehicles continue to confirm nexus.

Agents or other representatives

2023: Presence of sales agents or other representatives conducting business resulted in nexus. 2024: Regulations remain the same.

Key Comparisons

Both 2023 and 2024 maintain stringent guidelines ensuring anyone with a substantial physical presence within the state is subject to Oklahoma sales tax. No significant changes have been introduced between these years.

Economic nexus

Economic Nexus for Sales Tax in Oklahoma 2024 Compared to 2023

The economic nexus criteria for sales tax in Oklahoma have not changed from 2023 to 2024. The $100,000 sales threshold, the continuous need for marketplace facilitators to comply, and the local sales tax requirements all remain consistent.

Sales Threshold: Oklahoma's sales threshold for economic nexus in 2024 remains at $100,000 in gross sales, identical to the 2023 threshold.

Transactions Threshold: The requirement to meet a specific number of transactions, previously debated, has remained non-essential in both 2023 and 2024.

Registration Requirement: Both in 2024 and 2023, remote sellers meeting the threshold are mandated to register for an Oklahoma sales tax permit by the immediate next month following the threshold breach.

Tax Collection: In 2024, similar to 2023, sellers meeting the economic nexus must collect and remit Oklahoma sales tax on all taxable sales.

Marketplace Facilitators: Both years require marketplace facilitators to collect and remit sales tax if their collective sales through the platform exceed the $100,000 threshold.

Local Sales Tax: In 2024, as in 2023, remote sellers must also consider local sales taxes in addition to state sales taxes.

Sales tax exemption certificates

In Oklahoma, sales tax exemption certificates allow eligible businesses and entities to make purchases without paying state sales tax. Qualified parties, like nonprofit organizations, government entities, and manufacturers, can apply for these certificates.

The application process typically involves providing documentation that proves eligibility, such as tax identification numbers or evidence of nonprofit status. Once approved, the exempt entity presents the certificate to vendors at the time of purchase. Vendors must retain these certificates to validate non-collection of sales tax in case of an audit.

Misuse or fraudulent use of exemption certificates can result in penalties and tax liability for both the purchaser and the vendor.

Sales tax discounts and incentives

In 2024, Oklahoma offers several sales tax incentives and discounts designed to support businesses. Key incentives include:

Manufacturing Exemptions: Businesses involved in manufacturing may qualify for exemptions on sales tax for machinery, equipment, and items used in the production process.

Enterprise Zone Incentives: Companies operating in designated enterprise zones may receive sales tax rebates or reductions, particularly if they meet job creation or capital investment criteria.

Agricultural Exemptions: Agricultural businesses can benefit from exemptions on sales tax for items such as machinery and feed, fostering growth in the agricultural sector.

Pollution Control Equipment: Businesses installing pollution control equipment to meet environmental standards can qualify for sales tax exemptions on such equipment.

Data Centers: Oklahoma offers sales tax incentives for businesses that establish or expand data centers, reducing the tax burden on infrastructure and equipment investments.

State tax holidays in Oklahoma for 2024

Sales tax holidays are designated periods when specific items are exempt from sales tax to encourage consumer spending.

Oklahoma 2024 Sales Tax Holidays: There are no scheduled sales tax holidays in Oklahoma for 2024.