Taxation in Oklahoma

Oklahoma
This article is part of a series on the
politics and government of
Oklahoma

Taxation in Oklahoma takes many forms. Individuals and corporations in Oklahoma are required to pay taxes or fee charges to both levels of government: state and local. Taxes are collected by the government to support the provisions of public services. The Oklahoma Constitution vested the authority to levy taxes with the Oklahoma Legislature while the Oklahoma Tax Commission is the primary Executive agency responsible for collecting taxes.

The most significant forms of taxation are income tax, sales tax, excise taxes, and property tax.

State Taxation

Income Taxes

Taxes based on income are imposed at the State level, both on individuals and corporations. Oklahoma first enacted an individual income tax in 1915 and then a corporate income tax in 1931. Income taxes are steadily increased as a major State revenue source since 1933 when the Oklahoma Constitution was amended to prohibit State-level taxation of property.

Income taxes are now the largest source of revenue for the State government, accounting for approximately 36% of total state revenue.

Tax Rate

Individuals

Oklahoma has adopted a progressive income tax for individuals, in which the tax rate increases as the amount of personal income increase:

Individual Income Tax Rates[1]
Marginal Tax Rate Single /
Married Filling Separately		 Married Filing Jointly /
Qualifying Widow(er)s /
Heads of Households
0.5% $0 – $1,000 $0 – $2,000
1% $1,000.01 – $2,500 $2,000.01 - $5,000
2% $2,500.01 – $3,750 $5,000.01 - $7,500
3% $3,750.01 - $4,900 $7,500.01 - $9,800
4% $4,900.01 - $7,200 $9,800.01 - $12,200
4.80% $7,200.01 - $8,700 $12,200.01 - $15,000
5% $8,700.01+ $15,000.01+
Corporations

The corporate income tax rate is a flat tax of 6% for all corporations, regardless of earnings. When established in 1931, the corporate income tax was progressive but became flat in 1935.

Revenue Purpose

Both individual and corporate income taxes are earmarked by the Oklahoma Legislature to support specific state agencies and/or funds:

Individual and Corporate Income Taxes
Purpose Individual-Percentage Received Corporate-Percentage Received
General Revenue 85.66% 77.5%
Education Reform Fund 8.34% 16.5%
Teachers' Retirement Fund 5% 5%
Ad Valorem Reimbursement Fund 1% 1%

Sales and Use Tax

The State sales tax and use tax was first enacted in 1933 as a temporary one percent tax for the support of public schools. Two years later, the tax was renewed with revenues being deposited into the state General Fund. In 1939, the sales tax rate was increased to two percent with the revenues being used to fund public assistance programs. This remained unchanged until the 1980s when the revenues were redirected back to the General Fund. Additionally, throughout the 1980s, the tax rate was gradually increased from two percent to four percent. In 1990, the passage of the “Education Reform Act” increased the State sales tax rate to its present four and a half percent.

State sales taxes are now the second largest source of revenue for the State government, accounting for approximately 28% of total state revenue.

Tax Rate

The "Oklahoma Sales Tax Code" imposes a 4.5% Statewide tax on the sale of all goods within the State. The State also levies a 4.5% Statewide tax on the use, storage, and consumption of goods bought out of State.

Revenue Purpose

Both the State sales and use taxes are earmarked by the Oklahoma Legislature to support specific state agencies and/or funds:

State Sales and Use Taxes[2]
Purpose Percentage Received
General Revenue 83.61%
Education Reform Fund 10.46%
Teachers' Retirement Fund 5%
Tourism Fund 0.87%
Historical Society Fund 0.06%

Gross Production Tax

The State levies a gross production tax on the removal of natural products from Oklahoma’s land or water. The gross production tax was established in 1910 to tax the extraction of natural gas and oil. With the elimination of State-level property taxation, the gross production tax began an important source of State revenue. The current State gross production tax takes the form of an excise tax, with the amount of the tax based upon the sale price of oil and natural gas.

State sales taxes are the third largest source of revenue for the State government, accounting for approximately 12% of total state revenue.

Tax Rates

Oklahoma state law has imposed several taxes on the removal of natural resources of the State:

Gross Production and Excise Taxes on Natural Resources[3][4]
Resource Tax Imposed
Asphalt, Lead, Uranium, Zinc, Gold, Silver, and Copper 0.75%
Oil 7%
Natural Gas 7%
Petroleum Oil Excise 0.95%
Natural Gas Excise 0.95%

Revenue Purpose

The Oklahoma Legislature has earmarked the revenues from the gross production and petroleum excise tax to support various agencies and/or funds:

Gross Production and Excise Taxes on Natural Resources[5]
Purpose Ores and Precious Metals Oil Natural Gas Petroleum Gas Excise Natural Gas Excise
General Revenue 85.72% 85.72 82.634% 82.634%
County Highway Funds 7.14% 7.14% 7.14%
Local School Districts 7.14% 7.14% 7.14%
Common Education Technology Fund 25.72%
Higher Education Capital Fund 25.72%
Oklahoma Tuition Scholarship Fund 25.72%
County Bridge and Road Improvement Fund 3.745%
Tourism Capital Fund 1.427%
Conservation Commission Infrastructure Fund 1.427%
Community Water Infrastructure Development Fund 1.427%
Statewide Circuit Engineering District Fund 0.535%
Corporation Commission Plugging Fund 10.526% 10.526
Interstate Oil Compact Fund 6.84% 6.84%

Motor Vehicle Taxes

The modern excise tax on motor vehicles was established in 2000. The motor vehicle tax assesses a three and one quarter percent tax on the sale price of all vehicles in the State, new and used. Taxes are collected by local motor license agents (or tag agents) under the supervision of the Tax Commission.

State motor vehicle excise taxes are the fourth largest source of revenue for the State government, accounting for approximately 8% of total state revenue.

Tax Rates

Oklahoma state law has imposed several taxes on the removal of natural resources of the State:

Vehicle Taxes and Licenses
Source Tax Imposed
Aircraft Excise Tax 3.25%
New Motor Vehicle Excise Tax 3.25%
Used Motor Vehicle Excise Tax $20 on first $1,500 + 3.25% on remainder
Motor Vehicle Registration Fee Vehicle Age Years 1-4: $91/annually

Vehicle Age Years 5-8: $81/annually
Vehicle Age Years 9-12: $61/annually
Vehicle Age Years 13-16: $41/annually
Vehicle Age Years 17+: $21/annually

Motor Vehicle Rental Tax 6%
Overweight Vehicle Fee $40 per permit + $10 per thousand pounds above limit
New and Used Motor Boat Excise Tax 3.25%
Motor Boat Registration Fee Boat Age Years 1: $2.25 + $1.00 for every $100.00 of sale price

Boat Age Years 2-10: $2.25 + 90% of previous year's fee
Boat Age Years 11+: $2.25 + 90% of tenth year's fee

Revenue Purpose

The Oklahoma Legislature has provided that the excise tax on motor vehicles and boats and the registration fees for motor vehicles and boats are to be apportioned as follows:

Vehicle Taxes and Fees[6]
Purpose Motor Vehicle and Boat Taxes and Fees
Local School Districts 36.2%
General Revenue 29.84%
State Transportation Fund 0.31%
Local County Governments 8.07%
County Highway Funds 6.21%
Local City Governments 3.1%
Law Enforcement Retirement Fund 1.24%
Wildlife Conservation Fund 0.03%
County Improvements for Roads and Bridges Fund 15%

All revenues generated from the Aircraft Excise Tax are directed towards the Aeronautics Commission Fund, which supports the operations of the Oklahoma Aeronautics Commission.

The Oversized Vehicle Fees are apportioned in the same manner as the motor vehicle taxes and fees on the first $1,216,000 collected each month. Any revenues collected in excess of that amount are deposited into the Weigh Station Improvement Fund, which is used to maintain and expand the State's Weigh stations.

Motor Fuel Taxes

In 1923, Oklahoma enacted its first State-level excise tax on motor fuels. The motor vehicle tax has since its enactment been the primary funding mechanize used for the construction and maintenance of State roads and bridges. Prior to the enactment of the fuel tax, the State played a limited role in building the State’s transportation infrastructure, primarily overseeing the work conducted by local governments. The current motor fuel taxes are a set amount based upon the amount of fuel purchased and not a percentage of the sale price. The fuel taxes continue to be the State’s primary source of funding for infrastructure spending, with a significant portion of the revenues being forwarded to local level government.

State motor fuel taxes account for approximately 6% of total state revenue.

Tax Rates

Oklahoma state law levies taxes on both gasoline and diesel motor fuels:

Motor Fuel Taxes[7]
Source Tax Imposed
Gasoline Tax $0.16/gallon
Diesel Tax $0.13/gallon
Motor Fuel Special Assessment Fee $0.01/gallon on both gasoline and diesel fuels
Compressed Natural Gas Tax $0.05/gasoline gallon equivalent
Aircraft Fuel Tax $0.0008/gallon

Revenue Purpose

Oklahoma state law levies taxes on both gasoline and diesel motor fuels:

Motor Fuel Taxes Taxes[8][9][10]
Purpose Gasoline Tax Diesel Tax Motor Fuel Fee Aircraft Fuel Tax
State Transportation Fund First $250,000 collected monthly First $83,333.33 collected monthly
High Priority State Bridge Fund 1.625% 1.39%
State Transportation Fund 63.75% 64.34%
Local County Governments 30.125% 26.58%
Local County Highway Funds 3.85%
County Bridge and Road Improvement Fund 2.297% 3.36%
Local City Governments 1.875%
Statewide Circuit Engineering District Fund 0.328% 0.48%
Corporation Commission Fund First $1,000,000 collected monthly
Department of Environmental Quality Fund 8%
Petroleum Storage Tank Indemnity Fund 92%
Aeronautics Commission Fund 100%

Tobacco Taxes

The State levies taxes on cigarettes and other tobacco products. The State levies an excise tax on cigarettes, as well as various excise taxes on cigars and smoking and chewing tobacco. As Oklahoma is home to numerous Native American tribes, the State has entered into state-tribal tobacco compacts under which the tribes remit taxes to the State derived from the sale of tobacco products on Indian land.

State taxes on tobacco products account for approximately 4% of total state revenue.

Tax Rates

Oklahoma state law levies taxes on cigarettes as well as various other tobacco products:

Tobacco Taxes
Source Tax Imposed
Cigarette Tax $1.03/pack of 20
Cigarette License Tax $30 for 3 year permit for retailers

$250 for 1 year permit for wholesalers
$100 for 1 year permit for distributors

Tobacco Products Tax Little Cigars - $0.72/pack of 20

Large Cigar Tax - $0.12/each
Smoking Tobacco - 80% of factory list price
Chewing Tobacco - 60% of factory list price

Tobacco License Tax $30 for 3 year permit for retailers

$250 for 1 year permit for wholesalers
$100 for 1 year permit for distributors

Revenue Purposes

Cigarette Taxes[11]
Purpose Percentage Received
Health Employee and Economy Improvement Fund 22.06%
Comprehensive Cancer Center Debt Service Fund 3.09%
Trauma Care Assistance Revolving Fund 7.5%
OSU College of Osteopathic Medicine Fund 3.09%
Health Care Authority Medicaid Program Fund 26.38%
Mental Health and Substance Abuse Services Fund 2.65%
Breast and Cervical Cancer Treatment Fund 0.44%
Teachers’ Retirement System Revolving Fund 1%
Education Reform Fund 2.07%
Tobacco Prevention and Cessation Fund 0.66%
General Fund 16.83%
County and City Governments 14.23%

Insurance Tax

Oklahoma assesses a State level excise tax on insurance premiums paid across the State. The insurance tax is collected by the Oklahoma Insurance Department. While most of the insurance tax is deposited within the General Fund, the revenues also support the Insurance Department and provide revenues for the State’s employee retirement systems.

Insurance premium taxes account for approximately 2% of total state revenue.

Tax Rate

Insurance Tax[12]
Source Tax Imposed
Insurance Premiums 2.25%

Revenue Purpose

Revenues from insurance premium taxes are earmarked by the Oklahoma Legislature to support specific state agencies and/or funds. More than half of the revenues collected are used to support the State's public employee retirement funds, with the remainder allocated to the General Fund.

Insurance Tax[13]
Purpose Percentage Received
Firefighter Pension and Retirement Fund First $812,500 collected and 36% of remainder
Police Pension and Retirement Fund First $325,000 collected and 14% of remainder
Law Enforcement Retirement Fund First $112,500 collected and 5% of remainder
General Fund Remaining 45%

Alcohol Taxes

Oklahoma has enacted a number of taxes on alcoholic beverages. The alcoholic beverage tax on liquor is an excise tax varying in amount depending on the alcohol by volume of the drink and an excise tax of $11.25 on each barrel of low-alcohol beer sold. A special sales tax of 13.5% is levied on the sale of all mixed drinks.

State taxes on alcoholic beverage products account for approximately 1% of total state revenue.

See also

References

  1. ↑ Section 2355, Title 68, Oklahoma Statutes - Income Tax Rates
  2. ↑ Section 1353, Title 68, Oklahoma Statutes - Purpose of Sales and Use Taxes
  3. ↑ Section 1001, Title 68, Oklahoma Statutes - Gross Production Tax Rates
  4. ↑ Section 1101, Title 68, Oklahoma Statutes - Petroleum Excise Tax Rate
  5. ↑ Section 1004, Title 68, Oklahoma Statutes - Gross Production Tax Uses
  6. ↑ Section 1104, Title 47, Oklahoma Statutes - Vehicle Taxes and Fees Apportionment
  7. ↑ Section 500.4, Title 68, Oklahoma Statutes - Motor Fuel Tax Rates
  8. ↑ Section 500.6, Title 68, Oklahoma Statutes - Gasoline and Compressed Natural Gas Tax Apportionment
  9. ↑ Section 500.7, Title 68, Oklahoma Statutes - Diesel Tax Apportionment
  10. ↑ Section 354, Title 17, Oklahoma Statutes - Motor Fuel Special Assessment Apportionment
  11. ↑ Section 302-5, Title 68, Oklahoma Statutes - Additional Tax on Sale, Use, Gift, Possession, or Consumption of Cigarettes - Rate - Apportionment
  12. ↑ Section 624, Title 36, Oklahoma Statutes - Insurance Tax Rates
  13. ↑ Section 312.1, Title 36, Oklahoma Statutes - Insurance Tax Appropritation
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