OMES and OTC on the elimination of state sales tax on groceries

OKLAHOMA CITY — In recent days, there have been reports of cities and counties worried about losing revenue from the elimination of the state sales tax on groceries. The Oklahoma Office of Management and Enterprise Services and the Oklahoma Tax Commission would like to unequivocally state that cities and counties would still have the option to keep their sales tax on groceries under the governor’s plan.

Gov. Mary Fallin’s proposal to eliminate the most regressive state tax on the books will benefit all Oklahomans — saving a family of four $350 to $676 annually — and will not leave cities and counties in a lurch. The proposal eliminates only the state sales tax on groceries.

“We are in no way cutting off cities and counties, but we are offering families across the board, regardless of their income, a way to save their hard earned money,” said Secretary of Finance, Administration and Information Technology Preston L. Doerflinger. “Cities and counties will have control to set their own priorities and decide for themselves if they want local sales taxes on groceries.”

Dawn Cash, Vice Chairman of the Oklahoma Tax Commission, said “We recognize sales tax revenue is vital to local communities. The sales tax currently levied by cities and counties on the sales of groceries will not be affected. We will work with them to make all accommodations that are necessary.”

While current contracts with the cities and towns do call for the tax bases to be exactly the same, exceptions are provided by statute. As a member of the Streamlined Sales Tax Agreement, Oklahoma has agreed to keep the state and local tax bases identical. However, the agreement provides two exceptions. States can treat groceries and drugs different at the state level than the local level.

The provision in the Streamlined Agreement is in Section 308: “No member state shall have multiple state sales and use tax rates on items of personal property or services, except that a member state may impose a single additional rate, which may be zero, on food and food ingredients and drugs as defined by state law pursuant to the Agreement.”

The elimination of the state grocery tax is part of Gov. Fallin’s proposed budget that presents $1.5 billion in recurring revenue sources that permanently diversify and strengthen revenue streams for the state.

In fact, localities also stand to benefit from the governor’s other tax modernization proposals to bring the state a projected $839.7 million in recurring revenue, which would bring an estimated $648.3 million additional revenue for cities and $121.3 million for counties.