This month brings us to the Sooner State of Oklahoma. The state’s nickname, “The Sooner State,” is in reference to the non-native settlers who stated their claims on land before the official opening date of lands in the western Oklahoma Territory.
The state is in the Gulf of Mexico watershed, generally sloping from the high plains of its western boundary to the low wetlands of its southeastern boundary. With small mountain ranges, prairies, mesas and eastern forests, most of the state lies in the Great Plains, Cross Timbers, and the U.S. Interior Highlands, a region prone to severe weather.
Oklahoma is in a humid, subtropical region. It lies in a transition zone between a humid continental climate to the north, semi-arid climate to the west, and humid subtropical climate in the central, south and eastern portions of the state. Most of the state lies in an area known as Tornado Alley characterized by frequent interactions between cold, dry air from Canada, warm to hot, dry air from Mexico and the southwestern U.S., and warm, moist air from the Gulf of Mexico. The interaction between these three contrasting air currents produces severe weather with a frequency virtually unseen anywhere else on the planet.
Business Climate
Tulsa is home to the largest airline maintenance base in the world, which serves as the global maintenance and engineering headquarters for American Airlines. In total, aerospace accounts for more than 10% of Oklahoma’s industrial output, and it is one of the top states in aviation engine manufacturing. Because of its position in the south-center of the United States, Oklahoma is a major contributor to weather-related research.
The state is the top manufacturer of tires in North America. The state also contains one of the fastest-growing biotechnology industries in the nation.
Oklahoma is the 27th most agriculturally productive state, the fifth largest in cattle production and fifth largest in the production of wheat. Poultry and swine are its second and third-largest agricultural industries, respectively.
Tax Climate
Oklahoma’s top individual income tax rate is 5%. The top corporate income tax rate is 6%.
Apportionment: Oklahoma taxpayers apportion income using a 3 factor formula with sales, property, and payroll, equally weighted.
In Oklahoma, receipts from services are sources based on the location where the service provider performs the service, known as market-based sourcing.
Sales Tax Structure
The state sales tax rate is 5%.
Sellers who lack physical presence nexus in Oklahoma and have sales into the state that exceed $100,000 for the current or previous calendar year must register and remit sales tax to the state. Aggregate sales of taxable tangible personal property delivered to locations within the state are included in the threshold. Exempt sales and exempt services are not included in the threshold. This legislation went into effect on November 1, 2019.
A remote seller, marketplace facilitator, or referrer with aggregate sales of at least $10,000 in Oklahoma must file an election with the Tax Commission to either collect and remit sales and use tax on behalf of remote sellers or comply with non-collecting seller use tax notice and reporting requirements. The law went into effect on July 1, 2018.
With Oklahoma’s growing economy, it is a popular state for out-of-state businesses to sell their products to in-state customers, but the tax consequences for technology customers is not entirely clear. Prewritten software that is downloaded electronically is exempt from taxation. Additionally, custom software that is downloaded electronically is not taxable. Software-as-a-Service appears to be nontaxable, although little guidance has been issued. Analysis of the taxability of SaaS products is performed on a case by case basis. All digital products in Oklahoma are exempt from taxation.
A sales tax holiday is an annual event during which the Oklahoma Tax Commission allows certain items to be purchased sales-tax-free at any participating retailer within the state. Oklahoma has had an annual “Back to School” sales tax holiday since 2007. This tax holiday is meant to help parents save money when purchasing common back to school supplies for their children. This occurs each year from August 7-9.
Our team at Miles Consulting Group is always available to discuss the specifics of your situation, whether in Oklahoma or other U.S. States, and help you navigate the complex tax structures arising from multistate operations. Call us to help you achieve the best tax efficiencies.
Random Facts
- More than 25 Native American languages are spoken in Oklahoma, third only to Alaska and California.
- The first permanent Caucasian settlement was a French trading post in Salina in Mayes County in 1769.
- Cimarron County, in Oklahoma’s panhandle, is the only county in the United States that touches four other states: New Mexico, Texas, Colorado and Kansas.
- An average 62 tornadoes strike the state per year- one of the highest rates in the world.
- Gordon Matthews, born in Tulsa, was the inventor of an electronic communication system to store audio messages patented in 1982. We know it as voicemail.
- Edward Roberts, a 1968 Oklahoma State University graduate in electrical engineering, is credited with inventing the personal computer. He gave software giant Bill Gates his first job in the industry.
