Sales tax is paid to a local or state governing body for the sale of certain services and goods. In Oklahoma, the state sales tax is 4.5%, which is charged on sales of certain services and tangible personal property. Along with the state sales tax, local sales taxes and special district taxes may apply.
Business owners in Oklahoma act as agents of the state by collecting taxes from buyers and passing them to the proper tax authority. The Oklahoma Tax Commission administers sales and use tax.
Collected sales tax belongs to the state, and it’s the responsibility of business owners to manage the collected taxes to stay compliant with state and local laws. Failing to collect the necessary sales tax may lead to interest charges and penalties.
To help you avoid these issues, we cover all you should know about taxes for the sales of goods and services in our complete guide to Oklahoma sales tax below.
What Is Sales Tax?
According to Oklahoma law, you must charge and collect sales tax on all transfers of possession or title of tangible personal property in the state. Additionally, sales tax is levied on certain services provided in Oklahoma, usually for services that include creating or manufacturing a product for sale.
Individuals buying products pay sales tax, while business charge and remit this tax. If the transaction takes place within the boundaries of a municipality or county that levies a sales tax, these taxes also apply. If you ship goods, you may also need to collect tax at the rate of the location where the delivery occurs.
When you sell a product at your place of business, your business becomes the source, and you should charge the appropriate tax rate according to the location. If the product is delivered to a customer at another location, the place where the buyer receives the product becomes the source, and you should charge the appropriate tax rate for this point of delivery.
What Is Use Tax?
Use tax should be paid on purchased tangible personal property that’s brought into Oklahoma for use, consumption or storage when sales tax wasn’t previously paid on the purchase.
This tax is typically assessed on items purchased from out-of-state retailers and items purchased from in-state retailers who aren’t required to collect sales tax. If this property is brought into a municipality or county that levies a use tax, you may also need to pay the applicable municipal or county use tax.
Retailers that maintain a business in the state or make sales from a business outside Oklahoma for use in the state must also collect the appropriate state and local use tax from the customer. Use tax in Oklahoma is made up of two types — vendor and consumer:
- Vendor: Vendor use tax refers to the occurrence of a seller charging use tax on a product when a consumer buys it.
- Consumer: Consumer use tax may be applicable when a buyer isn’t charged use or sales tax on tangible personal property, but they bring a product in from outside the state for consumption or use.
Individuals may also pay use tax on untaxed items. For example, if an individual purchases something from a company online that’s outside of Oklahoma, and it’s shipped to them but they didn’t pay tax on it, they may owe use tax.
Who Must Collect Oklahoma Sales and Use Tax?
For your business to be subject to sales tax collection and the relevant rules in Oklahoma, it must have nexus established and use or sell a good or service that’s subject to state sales tax. Your business can be tied to Oklahoma if you have either physical or economic nexus.
If you’re a seller subject to sales tax in Oklahoma, you must act as a de facto collector, collecting this tax, filing returns and remitting the tax to the state tax authorities. When the following factors apply to you, you need to collect sales tax:
- You have nexus in Oklahoma.
- Your buyers are required to pay sales tax.
- You’re selling taxable services or goods to Oklahoma residents.
Remote sellers who don’t have a place of business in the state are still required to charge and collect state and use tax from the customer if they sell a minimum of $100,000 of taxable merchandise in Oklahoma in the current or previous calendar year.
If you’re a remote seller who doesn’t sell $100,000 of taxable merchandise, you must still notify buyers via your website and invoices that use tax is imposed and buyers must pay it unless there’s an applicable exemption. You also need to send an annual statement to your customers in Oklahoma notifying them of their total purchase amounts made in the previous calendar year.
How Does a Business Establish Nexus in Oklahoma?
In Oklahoma, business owners need to register for a sales and use tax permit with the Department of Revenue Services. You need a permit if your business is ongoingly selling tangible personal property. Tangible personal property refers to property that can either be seen, touched, measured, weighed or perceived in another manner to the senses.
Any of the following factors establish nexus:
- Ownership of real estate in the state.
- Maintenance of a business located in the state, including an office.
- Performance of service contracts or construction contracts in Oklahoma.
- Tangible property leasing and intangible rights licensing for use in Oklahoma.
- Ownership of a stock of goods on consignment or in a public warehouse in the state.
- Operation of Oklahoma mobile stores regardless of frequency like trucks with driver-salespersons.
- Sale of something that’s not tangible personal property like services, real estate and intangibles.
- Frequent or usual activity in the state by an employee or representative who solicits orders with the authority to accept them.
- Ownership of a stock of goods in a distributor’s hands or a non-employee representative’s in the state if used for filling orders for the owner’s account.
- Frequent or usual activity by an employee or representative who engages in the performance of services or purchasing activity — performance of services may include construction, assembly, installation or equipment repair.
- Some miscellaneous activities performed by an employee or representative in the state, such as the collection of delinquent accounts, credit investigations and the conduction of training seminars or classes for customer personnel in the maintenance, repair and operation of the products.
As noted above, your business can be tied to Oklahoma if you have either physical or economic nexus. When you have physical nexus, you have enough tangible activity or presence in Oklahoma to be required to pay sales tax. When you have economic nexus, this means you pass Oklahoma’s economic threshold for the number of transactions or total revenue.
Do You Have Economic Nexus in Oklahoma?
If your business doesn’t have a physical presence in the state of Oklahoma, you may still have economic nexus if your business exceeds the annual sales threshold of $100,000 in the previous 12 months. If you’ve established economic nexus in Oklahoma, you need to register with the Department of Revenue to obtain a sales and use tax permit.
Do You Have Physical Nexus in Oklahoma?
In Oklahoma, you’re considered a seller with physical nexus if any of the following applies:
- You have a place of business or office in the state.
- You deliver merchandise in the state in vehicles owned by the taxpayer.
- You have a representative, salesperson, installer or contractor doing business in Oklahoma.
- You have goods in a distribution center, warehouse or another place of business in the state.
Remote and Marketplace Sellers
Remote and marketplace sellers should collect sales tax for sales made in Oklahoma. There are only two exceptions to this rule. If your marketplace facilitator collects sales taxes, you don’t need to. If your business has made less than $100,000 in gross receipts, you may not need to collect Oklahoma taxes.
A marketplace facilitator is an entity that performs the following:
- Receives compensation for provided services.
- Collecting receipts from customers and remitting payments to marketplace sellers directly, indirectly or through an agreement with a third party.
- Facilitates a minimum amount of retail sales by offering a forum to advertise or list of tangible personal properties that are subject to sales and use taxes, including taxable services or digital goods.
If you sell through a marketplace facilitator like Amazon, you may not need to collect sales or use tax on these sales if the marketplace facilitator collects and reports sales tax on them. However, these sales may count toward your total sales threshold, so you’ll be required to collect tax on sales you make directly through your website or another marketplace that doesn’t collect sales tax for you.
Businesses typically collect taxes for their customers’ convenience, as customers would otherwise need to pay use tax if they don’t pay sales tax.
Types of Sales Subject to Sales Tax in Oklahoma
If you’ve determined you have nexus in the state of Oklahoma, you now should determine whether the services or products you sell are subject to the state’s sales and use tax. Rentals and sales of tangible personal property are subject to sales tax in the state unless specifically exempt.
Though these rules can seem straightforward, applying Oklahoma tax rules to your business can be difficult. If you’re struggling to handle or understand Oklahoma sales tax, turn to us at Polston Tax. Our Oklahoma City tax attorneys are here to help.
Sales and Use Tax for Retail Sales
In Oklahoma, sales and use tax is the most common tax paid by business filers. Counties and cities also levy sales taxes that are added to the sales tax rate in the state. Depending on the special tax, a retailer or wholesaler must collect the tax and remit payment to the Oklahoma Tax Commission.
Other related taxes include hotel room occupancy tax, alcohol tax, motor vehicle excise tax, discretionary taxes and tobacco taxes.
1. Lodging (Hotel Room Occupancy Tax)
A lodging tax isn’t charged at the state level in Oklahoma, but certain cities and counties charge a lodging tax. Each quarter, this tax can change. As of the first quarter of 2023, the following cities and counties impose a lodging tax:
- Atoka: 5%
- Blaine City: 5%
- Calera: 4%
- Carlton Landing: 5%
- Chandler: 5%
- Cherokee: 5%
- Cherokee County: 4%
- Cimarron County: 5%
- Coal County: 5%
- Cotton County: 5%
- Drumright: 4%
- Durant: 5%
- Edmond: 4%
- Eufaula: 9%
- Greer County: 5%
- Grove: 5%
- Guthrie: 7%
- Harrah: 5%
- Jefferson County: 5%
- Johnston County: 5%
- Latimer County: 5%
- Love County: 5%
- McCurtain County: 3%
- Marshall County: 5%
- Muskogee County: 5%
- Osage County: 5%
- Pontotoc County: 5%
- Sand Springs: 7%
- Shawnee: 5%
- Stillwater: 4%
- Stroud: 4%
- Sulphur: 5.5%
- Waynoka: 8%
2. Alcohol Tax
In Oklahoma, retailers that sell alcoholic beverages are required to mark up alcoholic beverages by a minimum of 6%, regardless of whether the alcohol is consumed on or off premises.
3. Motor Vehicle Excise Tax
The vehicle excise tax in Oklahoma applies as follows:
- New vehicle: For a new vehicle, the vehicle excise tax is 3.25% of the purchase price.
- Used vehicle: For a used vehicle, the vehicle excise tax is $20 on the first $1,500 of the purchase, along with 3.25% on the remaining amount.
- New boat and boat motor: For a new boat or boat motor, the vehicle excise tax is 3.25% of the manufacturer’s original retail price.
- Used boat and boat motor: For a used boat or boat motor, the vehicle excise tax is 3.25% of the taxable value. This value decreases by 35% every year.
- New manufactured home: For a new manufactured home, the vehicle excise tax is 3.25% of the first 50% of the purchase price.
- Used manufactured home: For a used manufactured home, the vehicle excise tax is 3.25% of 65% of half of the purchase price.
- New and used utility and all-terrain vehicles and off-road motorcycles: For a new or used utility vehicle, all-terrain vehicle, or off-road motorcycle, the vehicle excise tax is 4.5% of the actual purchase price. At a minimum, this tax for these vehicles is $5.
4. Discretionary Taxes (Local Tax Rates)
A number of counties and cities in Oklahoma impose a local sales tax. If your business is located in a city or county in which discretionary taxes are charged, your business should collect both taxes on top of the state sales tax.
To determine whether your business must collect these taxes, review the COPO number. If the city and county COPO numbers have the same first two digits, a city and county tax are both imposed.
For example, the COPO of Mayes County is 4988, and the COPO of Salina is 4914. Because the first two digits match, a business would need to collect both the county and city tax.
5. Tobacco Taxes
In Oklahoma, a tax stamp is used to show that taxes are paid on tobacco products. If a wholesaler pays this tax, it add this tax to the purchase price of the tobacco product. Tobacco products that may be subject to this tax include cigarettes, cigars, smoking tobacco and smokeless tobacco.
A retailer should add the following taxes on the sale of these products:
- Cigars: A tobacco tax of $10 per thousand applies to cigars that weigh more than 3 pounds per thousand at a manufacturer’s recommended retail price that exceeds $0.04 per cigar. A tax of $90 per thousand applies to cigars that weigh greater than 3 pounds per thousand.
- Smoking tobacco: A 15% tobacco tax is applied to the manufacturer’s list price for smoking tobacco.
- Smokeless tobacco: A 10% tobacco tax is applied to the manufacturer’s list price for smokeless tobacco.
Note that Oklahoma has unique tobacco tax rules when it comes to Native American tobacco sales. These taxes differ based on the terms of compacts negotiated with the state. Since 2012, the tax on most tribal cigarette sales is $1.03 per package of cigarettes, and tribes receive a rebate of a portion of the tax.
Oklahoma Sales Tax Exemptions
Several entities are exempt in the state from sales tax. Oklahoma sales tax-exempt items include:
- Raw materials
- Cable television
- Spaceport users
- Medical services
- Youth camps
- American Legion
- YMCA and YWCA
- Blue Star mothers
- Computer services
- Web search portals
- Agricultural entities
- Non-accredited museums
- Volunteer fire departments
- Sales to specific nonprofits
- Periodicals and newspapers
- Software as a Service
- Campus construction projects
- Television and radio broadcasting
- Qualified aircraft maintenance facilities
- The Marine Corps League of Oklahoma
- Federal agents with advanced purchase
- Local, county and state government entities
- Organizations that support Oklahoma state parks
- Children’s homes supported by churches
- Organizations that operate as collaborative models
- Veterans of Foreign Wars of the Oklahoma Chapters
- Organizations that offer education related to robotics
- Shelters for abandoned, neglected or abused children
- Authorized household members of 100% disabled veterans
- Organizations with membership limited to honorably discharged veterans
- Nonprofit organizations that restore single-family housing after a disaster
- Nonprofit organizations that sell, remodel and construct affordable housing
- Authorized household members of surviving spouses of 100% disabled veterans
- Un-remarried surviving spouses of 100% disabled veterans that have service-related injuries
To qualify as exempt from sales tax, you must provide certain documents.
Oklahoma Sales Tax Holiday
Oklahoma has a sales tax holiday that occurs on the first Friday through Sunday of August. During the Oklahoma sales tax holiday, consumers can buy clothing tax-free as long as it costs less than $100.
What Happens if You Don’t Collect Oklahoma Sales Tax?
If your business meets the criteria for being required to collect sales tax and you fail to do so, you’ll be responsible for the tax due, along with any applicable interest and penalties charged. Because it may be nearly impossible to collect the sales tax from your customers after a transaction, it’s essential to set up your tax collection efforts at the point of sale.
Even if you accidentally miss a filing deadline for Oklahoma sales tax, file the return as quickly as possible. Failing to file a return and remit the collected tax on time could lead to interest charges and penalties. The longer you wait, the greater the interest and penalty.
Contact the Oklahoma Tax Commission to learn about a potential acquisition’s current status if you’re planning to acquire a business. After you buy the business, you’ll be responsible for its outstanding sales and use tax liability.
Choose one of the options below if you should’ve collected sales tax in Oklahoma but didn’t:
- Register to pay: If your tax liability, penalties and interest are minimal, you may want to register with the state and pay your back taxes and associated interest and penalties. You may also want to register to pay if your business recently established nexus. Work with a tax professional if you’re unsure of your liability or want further guidance on which option is right for your business.
- Complete a voluntary disclosure agreement (VDA): A VDA can be used to reduce the lookback period for your collected sales tax. If you failed to collect sales tax over an extended period, you may benefit from completing a VDA. If your business established nexus a number of years ago or your sales tax penalty savings would be more than the cost of professional fees for the VDA, this may be the right option for your business.
There’s no one-size-fits-all solution. Our sales tax professionals can help you determine which solution may be the most cost-effective for your business.
What Should You Do if You Receive a Sales Tax Audit Notice?
If your business receives a sales tax audit notice, you may want to hire a sales tax professional who can guide you through the process and offer you the peace of mind you need during the audit process. Consider the following factors to determine whether you should work with a professional if you receive an Oklahoma sales tax audit notice:
- You lack sales tax audit experience.
- You’re unsure which rules and procedures a state auditor should follow.
- You lack the confidence needed to control the audit and shape the results.
- You’re uncertain when to provide documents and when you should push back.
- You lack a thorough understanding of your areas of exposure for sales and use tax.
What Should You Expect From a Sales Tax Auditor in Oklahoma?
If you know you’ll be facing a sales tax audit in Oklahoma, you may want to know what to expect from an auditor. The following are a few of the steps you can expect the auditor to take:
- Request records
- Perform research before the audit
- Review out-of-state and exempt sales
- Schedule and conduct an entrance conference
- Conduct an audit for use tax to ensure you adequately paid use tax on applicable purchases
- Compare sales and use tax returns with your bank statements or federal income tax returns to ensure you reported all gross or applicable sales
The following are some of the areas that may be audited:
- Office expense
- Advertising expense
- Miscellaneous expense
- Maintenance and repair
- Auto and truck expense
It’s crucial to understand the rights of your business after the audit. After the audit is completed, the auditor may hold an exit conference for you. The auditor produces an audit report and corresponding papers to support their assessment of your Oklahoma sales and use tax.
During this meeting, you may want to have a sales tax professional at your side. You’ll view the auditor’s findings, and you may need to contest areas where the auditor misapplied sales tax laws or overstepped their bounds.
Wait to agree on the sales tax assessment until after a sales tax professional reviews it for any issues. You may be able to reduce your company’s sales tax liability when you partner with a professional who thoroughly understands the sales tax laws in Oklahoma.
Registering for and Filing Oklahoma’s Taxes
Once you’ve determined that your business may need to collect and remit sales and use taxes, you should know how to register and file Oklahoma taxes.
How to Register for Your Permit
To pay sales tax in Oklahoma, register online for a tax account. After you register, you can submit tax returns and remit the tax payments. Unless your business receives an exemption, you should file reports and remit taxes via the Oklahoma Tax Commission’s website.
To apply, you’ll need to provide information about your business, such as:
- Your business name
- Your business address
- Your products to be sold
- Your contact information
- Your projected monthly sales
- The date business activities started
- Your projected monthly taxable sales
- Federal Employer Identification Number
How to File Sales Tax
To properly file your sales tax in Oklahoma, you should calculate the amount you owe, file a return and make your payments. You can use online calculators that can perform this calculation for you or reach out to a tax professional at Polston Tax who can calculate the sales taxes you owe in Oklahoma.
To file your tax return, you can either file by mail, file online or file with a professional:
- File by mail: File on paper with Form STS-20002 and submit it by mail. If you pay more than a certain amount per month, you may need to file online.
- File online: You can also file online via the OK Taxpayer Access Point, enter your transaction data manually and remit the payment through this system. This service is free, but filing online can be time-consuming if you’re a larger seller.
- File with a professional: Alternatively, you can choose to work with a tax professional who can file your sales tax and handle your payments, so you never have to deal with performing calculations, completing spreadsheets or filling out tax returns.
Due Dates for Oklahoma’s Sales Taxes
Depending on your company’s amount of gross receipt, you need to file tax returns semi-monthly, monthly or semi-annually.
Your business should participate in the Tax Commission’s electronic data interchange program and electronic funds transfer if your tax liability is at least $2,500 per month.
For sales made between the 1st and 15th of the month, the due date is the 20th of the current month. For sales made between the 16th and the last day of the month, the due date is the 20th of the next month.
This means your sales between March 1 through March 15 are due March 20, and your sales between March 16 and March 31 are due before or on April 20.
Another possibility for the due date of your sales taxes is on a monthly basis. Payments and reports are due before or on the 20th day of the month in the month after you collect the taxes. For example, January’s taxes are due before or on February 20.
If your company’s tax liability doesn’t exceed $50 in a month, you can file semi-annually after you inform the Oklahoma Tax Commission. Your business must qualify by showing your business is transient, operates seasonally, makes incidental sales or makes sales through salespersons who don’t have an established business location.
Semi-annual due dates are before or on January 20 and July 20 of each year. This means the taxes you collect between January and June are due before or on July 20.
How to Get a Sales Tax Permit in Oklahoma
Register online at the Taxpayer Access Point for your sales tax permit in Oklahoma. Alternatively, you can register in person at the Oklahoma Tax Commission offices in Tulsa or Oklahoma City. Have the following information on hand when you register for your sales tax permit:
- Business entity type
- Types of products sold
- Date of incorporation, if applicable
- Personal identification information, such as address and Social Security number
- Business identification information, such as name, address and Federal Employer Identification Number
Keep in mind you’ll need to pay an application fee for a sales tax permit in Oklahoma, and if you pay with a card, you may need to pay a convenience fee. Additional business registration fees may also apply.
How to Collect Sales Tax
After you register to collect sales tax in Oklahoma, you should apply the proper rate to every taxable sale, remit sales tax, file your returns on time and maintain good records. How you collect sales tax in the state is impacted by how your business sells goods:
- Marketplace: Marketplaces like Etsy and Amazon tend to provide sales tax rate collection and determination that’s integrated into the solution, though this usually comes with a fee. You can set up what you need via your seller dashboard while your marketplace provider does most of the heavy lifting.
- Hosted store: If you have a hosted store through a platform like Squarespace or Shopify, the solution may offer sales tax rate collection and determination that’s integrated. A hosted store offers you a dashboard environment where you can manage your Oklahoma sales tax collection.
- Mobile point of sale: A mobile point-of-sale system like Square depends on GPS to identify the sale location. Then, the appropriate tax rate is determined and applied to an order. You can set specific tax rules in the system to allow for certain product tax rules.
- Brick-and-mortar store: If you own a physical store, you may want a brick-and-mortar point-of-sale solution that allows you to set the sales tax rate according to your store location. You can then create new tax groups that enable specific product tax rules.
How to Collect Taxes on Shipping and Handling
If you need to collect sales tax, you should also consider how to collect taxes on shipping and handling. In Oklahoma, if shipping and handling charges are separately started, they’re tax-exempt. However, if these charges are included in your sale price, they’re taxable.
There are some exceptions to the rules for sales tax associated with shipping and handling, so you may want to turn to a tax professional who can guide you through the process.
Contact Polston Tax About Oklahoma Sales Tax Rules
At Polston Tax, we resolve back tax issues, IRS or state audits, IRS levies, and liens. We can help you prepare your tax returns, and if you own a business, we can solve business accounting problems you don’t have the time or know how to handle. Our services include:
- Audit representation
- IRS tax debt resolution
- State tax debt resolution
- Accounting and bookkeeping
- Tax planning and preparation
- Cannabis accounting and bookkeeping
When you work with us, you get a team of people to support you and achieve the best possible solution, including a tax attorney, a case manager, an accountant and a tax preparer. We work with the IRS every day and handle all types of cases, so we know what to expect, what strategies are most successful and how to negotiate.
We also work on your tax case from start to finish. If necessary, we’ll file appeals, contact the IRS, assist you in filing and sending forms, and request confirmation about the submission from the IRS. After your resolution, we have a full-service tax and accounting team to ensure you can avoid tax challenges in the future.
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