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3:22 pm
Wed March 19, 2014

Oklahoma Ranks Fifth for Highest Average Combined Sales Tax

Oklahoma has the nation's fifth-highest combined average sales tax rate, but an economist suggests broadening the tax base and lowering the rate rather than abolishing sales tax.
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Oklahoma has the fifth-highest average combined state and local sales tax in the U.S.

A study from the non-profit Tax Foundation finds the rate is 8.72 percent, just 0.73 percent behind No. 1 Tennessee. Tax Foundation economist Scott Drenkard said high-sales tax states need to broaden the base and lower the rate.

"Higher-income individuals spend a greater proportion of their income on services, which, right now, go untaxed through the sales tax," Drenkard said. "Expanding the sales tax base to services helps a little bit with fairness and helps a lot with neutrality."

The state sales tax is 4.5 percent, with county taxes ranging from 0–2 percent and local taxes ranging from 0–5 percent.

Oklahoma’s state sales tax ranks 36th, but county and local taxes push the average combined rate up. Drenkard said high rates and a complicated tax structure could deter businesses.

"Oklahoma, like many other states, has an issue where there's a lot of business inputs taxation," Drenkard said. "That means when businesses buy things that they use to create other products, sometimes they're subject to sales taxes, and they really shouldn't be."

Tulsa’s 8.517 percent sales tax is lower than the state average and will fall to just 8.45 percent July 1.