Oklahoma sales tax guide

Sales tax is a tax paid to a governing body (state or local) on the sale of certain goods and services. Oklahoma first adopted a general state sales tax in 1933, and since that time, the rate has risen to 4.5 percent. On top of the state sales tax, there may be one or more local sales taxes, as well as one or more special district taxes, each of which can range between 0 percent and 7 percent. Currently, combined sales tax rates in Oklahoma range from 4.5 percent to 11.5 percent, depending on the location of the sale.

As a business owner selling taxable goods or services, you act as an agent of the state of Oklahoma by collecting tax from purchasers and passing it along to the appropriate tax authority. Sales and use tax in Oklahoma is administered by the Oklahoma Tax Commission (OTC). 

Any sales tax collected from customers belongs to the state of Oklahoma, not you. It’s your responsibility to manage the taxes you collect to remain in compliance with state and local laws. Failure to do so can lead to penalties and interest charges.

In Oklahoma, sales tax is levied on the sale of tangible goods and some services. The tax is collected by the seller and remitted to state tax authorities. The seller acts as a de facto collector.

To help you determine whether you need to collect sales tax in Oklahoma, start by answering these three questions:

1. Do you have nexus in Oklahoma?
2. Are you selling taxable goods or services to Oklahoma residents?
3. Are your buyers required to pay sales tax?

If the answer to all three questions is yes, you’re required to register with the state tax authority, collect the correct amount of sales tax per sale, file returns, and remit to the state.

If you meet the criteria for collecting sales tax and choose not to, you’ll be held responsible for the tax due, plus applicable penalties and interest.

It’s extremely important to set up tax collection at the point of sale — it’s near impossible to collect sales tax from customers after a transaction is complete.

The need to collect sales tax in Oklahoma is predicated on having a significant connection with the state. This is a concept known as nexus. Nexus is a Latin word that means "to bind or tie," and it’s the deciding factor for whether the state has the legal authority to require your business to collect, file, and remit sales tax.

Sales tax nexus in all states used to be limited to physical presence: A state could require a business to register and collect and remit sales tax only if it had a physical presence in the state, such as employees or an office, retail store, or warehouse.

In June 2018, the Supreme Court of the United States overruled the physical presence rule with its decision in South Dakota v. Wayfair, Inc. States are now free to tax businesses based on their economic and virtual connections to the state, or economic nexus.

While physical presence still triggers a sales tax collection obligation in Oklahoma, it’s now possible for out-of-state sellers to have sales tax nexus with Oklahoma.

Out-of-state sellers with no physical presence in a state may establish sales tax nexus in the following ways:

Affiliate nexus: Having ties to businesses or affiliates in Oklahoma. This includes, but isn’t limited to, the design and development of tangible personal property (goods) sold by the remote retailer, or solicitation of sales of goods on behalf of the retailer.

Economic nexus: Having a certain amount of economic activity in the state. For sales made on and after November 1, 2019, a remote seller must register with the state then collect and remit Oklahoma sales tax if they have at least $100,000 in aggregate sales of tangible personal property in Oklahoma during the current or preceding calendar year.

Inventory in the state: Storing property for sale in the state. This includes merchandise owned by Fulfillment by Amazon (FBA) merchants and stored in Oklahoma in a warehouse owned or operated by Amazon.

Marketplace sales: Making sales through a marketplace. Effective July 1, 2018, marketplace facilitators with at least $10,000 in aggregate sales of tangible personal property in Oklahoma in the immediately preceding 12-month calendar period must either elect to collect and remit tax on behalf of third-party sellers or comply with non-collecting seller use tax notice and reporting requirements.

For more information, see the Oklahoma Tax Commission FAQ.

The Oklahoma Tax Commission requires certain non-collecting sellers, referrers, and marketplace facilitators to notify customers about their potential use tax liability, provide customers with an annual purchase summary, and provide the state with a customer information report. The precise nature of these requirements varies from state to state; for more state-specific information, see Oklahoma Legislative Summary 2016.

Sales tax nexus can linger even after a retailer ceases the activities that caused it to be “engaged in business” in the state. This is known as trailing nexus. As of July 2019, Oklahoma does not have an explicitly defined trailing nexus policy.

If you’re an active Amazon seller and you use Fulfillment by Amazon (FBA), you need to know where your inventory is stored and if its presence in a state will trigger nexus. FBA sellers can also download an Inventory Event Detail Report from Amazon Seller Central to identify inventory stored in Oklahoma.

If you sell taxable goods to Oklahoma residents and have inventory stored in the state, you likely have nexus and an obligation to collect and remit tax. To begin to understand your unique nexus obligations, check out our free economic nexus tool or consult with a trusted tax advisor.

In some states, sales tax rates, rules, and regulations are based on the location of the seller and the origin of the sale (origin-based sourcing). In others, sales tax is based on the location of the buyer and the destination of the sale (destination-based sourcing). 

Oklahoma is a destination-based state. This means you’re responsible for applying the sales tax rate determined by the ship-to address on all taxable sales.

After determining you have sales tax nexus in Oklahoma, you need to register with the proper state authority and collect, file, and remit sales tax to the state. We get a lot of questions about this and recognize it may be the most difficult hurdle for businesses to overcome. Avalara Licensing can help you obtain your Oklahoma business license and sales tax registration.

You can register for an Oklahoma seller’s permit online through the OTC. To apply, you’ll need to provide the OTC with certain information about your business, including but not limited to:

• Business name, address, and contact information
• Federal EIN number
• Date business activities began or will begin
• Projected monthly sales
• Projected monthly taxable sales
• Products to be sold

The cost to register for a sales tax permit in Oklahoma is $20.

You must register with the Oklahoma Tax Commission if you acquire an existing business in Oklahoma. The state requires all registered businesses to have the current business owner’s name and contact information on file.

The Streamlined Sales and Use Tax Agreement (SSUTA), or Streamlined Sales Tax (SST), is an effort by multiple states to simplify the administration and cost of sales and use tax for remote sellers. Remote sellers can register in multiple states at the same time through the Streamlined Sales Tax Registration System (SSTRS).

Oklahoma became a full member of the SST on October 1, 2005.

Once you've successfully registered to collect Oklahoma sales tax, you'll need to apply the correct rate to all taxable sales, remit sales tax, file timely returns with the Oklahoma Tax Commission, and keep excellent records. Here’s what you need to know to keep everything organized and in check.

How you collect Oklahoma sales tax is influenced by how you sell your goods:

Brick-and-mortar store: Have a physical store? Brick-and-mortar point-of-sale solutions allow users to set the sales tax rate associated with the store location. New tax groups can then be created to allow for specific product tax rules.

Hosted store: Hosted store solutions like Shopify and Squarespace offer integrated sales tax rate determination and collection. Hosted stores offer sellers a dashboard environment where Oklahoma sales tax collection can be managed.

Marketplace: Marketplaces like Amazon and Etsy offer integrated sales tax rate determination and collection, usually for a fee. As with hosted stores, you can set things up from your seller dashboard and let your marketplace provider do most of the heavy lifting.

Mobile point of sale: Mobile point-of-sale systems like Square rely on GPS to determine sale location. The appropriate tax rate is then determined and applied to the order. Specific tax rules can be set within the system to allow for specific product tax rules.

Oklahoma sales tax collection can be automated to make your life much easier. Avalara AvaTax seamlessly integrates with the business systems you already use to deliver sales and use tax calculations in real time.

Some goods are exempt from sales tax under Oklahoma law. Examples include purchases made with food stamps, prescription drugs, and some manufacturing equipment.

We recommend businesses review the laws and rules put forth by the Oklahoma Tax Commission to stay up to date on which goods are taxable and which are exempt, and under what conditions.

Some customers are exempt from paying sales tax under Oklahoma law. Examples include government agencies, some nonprofit organizations, and merchants purchasing goods for resale.

Sellers are required to collect a valid exemption or resale certificate from buyers to validate each exempt transaction.

Oklahoma sales tax exemption and resale certificates are worth far more than the paper they’re written on. If you’re audited and cannot validate an exempt transaction, the Oklahoma Tax Commission may hold you responsible for the uncollected sales tax. In some cases, late fees and interest will be applied and can result in large, unexpected bills.

Sales tax holidays exempt specific products from sales and use tax for a limited period, usually a weekend or a week. Approximately 17 states offer sales tax holidays every year. 

As of July 2019, Oklahoma has the following tax holidays scheduled:

• August 2–4, 2019
  • Clothing and footwear priced less than $100
    

        Applies to state and local sales tax            

You're registered with the Oklahoma Tax Commission and you've begun collecting sales tax. Remember, those tax dollars don't belong to you. As an agent of the state of Oklahoma, your role is that of intermediary to transfer tax dollars from consumers to the tax authorities.

Once you’ve collected sales tax, you’re required to remit it to the Oklahoma Tax Commission by a certain date. The Oklahoma Tax Commission will then distribute it appropriately.

Filing an Oklahoma sales tax return is a two-step process comprised of submitting the required sales data (filing a return) and remitting the collected tax dollars (if any) to the OTC. The filing process forces you to detail your total sales in the state, the amount of sales tax collected, and the location of each sale.

While sales & use tax filing form 20002 is still available, online filing is required through the Oklahoma Taxpayer Access Point (OkTAP).

The Oklahoma Tax Commission will assign you a filing frequency. Typically, this is determined by the size or sales volume of your business. State governments generally ask larger businesses to file more frequently. See the filing due dates section for more information.

Oklahoma sales tax returns and payments must be remitted at the same time; both have the same due date.

You may file directly with the OTC by visiting their site and entering your transaction data manually. This is a free service, but preparing Oklahoma sales tax returns can be time-consuming — especially for larger sellers.

To save time and avoid costly errors, many businesses outsource their sales and use tax filing to an accountant, bookkeeper, or sales tax automation company like Avalara. This is a normal business practice that can save business owners time and help them steer clear of costly mistakes due to inexperience and a lack of deep knowledge about Oklahoma sales tax code.

Once you have an Oklahoma seller's permit, you’re required to file returns at the completion of each assigned collection period regardless of whether any sales tax was collected. When no sales tax was collected, you must file a "zero return.”

Failure to submit a zero return can result in penalties and interest charges.

The OTC requires all businesses to "close their books" by filing a final sales tax return. This also holds true for business owners selling or otherwise transferring ownership of their business.

Many states encourage the timely or early filing of sales and use tax returns with a timely filing discount.

As of July 2019, the OTC does not offer sales tax filers a discount.

It's important to know the due dates associated with the filing frequency assigned to your business by the Oklahoma Tax Commission. This way you'll be prepared and can plan accordingly. Failure to file by the assigned date can lead to late fines and interest charges.

The OTC requires all sales tax filing to be completed by the 20th day of the month following the tax period. Below, we've grouped Oklahoma sales tax filing due dates by filing frequency for your convenience. Due dates falling on a weekend or holiday are adjusted to the following business day.

Filing an Oklahoma sales tax return late may result in a late filing penalty as well as interest on any outstanding tax due. For more information, refer to our section on penalties and interest.

In the event an Oklahoma sales tax filing deadline was missed due to circumstances beyond your control (e.g., weather, accident), the OTC may grant you an extension. However, you may be asked to provide evidence supporting your claim.

Hopefully you don't need to worry about this section because you're filing and remitting Oklahoma sales tax on time and without incident. However, in the real world, mistakes happen.

If you miss a sales tax filing deadline, follow the saying, “better late than never,” and file your return as soon as possible. Failure to file returns and remit collected tax on time may result in penalties and interest charges, and the longer you wait to file, the greater the penalty and the greater the interest.

If you’re in the process of acquiring a business, it’s strongly recommended that you contact the OTC and inquire about the current status of the potential acquisition. Once you've purchased the business, you’ll be held responsible for all outstanding Oklahoma sales and use tax liability.

If you’re collecting sales tax from Oklahoma residents, you’ll need to consider how to handle taxes on shipping and handling charges.

If separately stated, shipping and handling charges for sales in Oklahoma are tax exempt. If shipping and handling charges are included in the sale price, the charges are taxable.

There are exceptions to almost every rule with sales tax, and the same is true for shipping and handling charges. Specific questions on shipping in Oklahoma and sales tax should be taken directly to a tax professional familiar with Oklahoma tax laws.

For additional information, see Oklahoma sales and use tax guide.