This month, we continue our blog series with a contrast of a couple of Southern plain states – Oklahoma and Arkansas – specifically their treatment of technology items for sales tax purposes.

Wait! Already know you need help with Oklahoma or Arkansas issues? Please reach out to us at info@milesconsultinggroup.com

Software as a Service (SaaS) in Oklahoma vs. SaaS in Arkansas

Software as a Service (SaaS) is subject to sales tax in several jurisdictions across the country.  Approximately half of states do tax the SaaS revenue stream. Check out our interactive SaaS taxability map here: https://milesconsultinggroup.com/saas-sales-tax-by-state-map/. As you’ll see below, both states differ regarding their approaches of sales tax treatment of SaaS.

Cloud Computing Services are exempt in Oklahoma.
In Oklahoma, SaaS is treated as a service. Only specified services are subject to sales tax in Oklahoma and SaaS is not specified as a taxable service and is therefore not subject to sales tax in Oklahoma. Oklahoma consistently excludes SaaS and other cloud-based services from sales tax.

SaaS is not taxable in Arkansas.

In Arkansas, SaaS is also considered nontaxable. If the software is hosted remotely and accessed via the cloud, Arkansas does not impose sales tax on the sale of SaaS. The key is that SaaS does not involve a transfer of tangible personal property (TPP) but grants access to the use of hosted software. This type of transaction is not subject to sales tax in Arkansas.

Software in Oklahoma vs. Software in Arkansas

Oklahoma does not impose sales and use tax on prewritten computer software sold electronically. Prewritten software that is delivered electronically is exempt in Oklahoma. It’s important to note that the software cannot be delivered on any tangible media in order to maintain its exempt status. Delivered electronically specifically means delivered to the customer by means other than tangible storage media.

Prewritten computer software delivered electronically is not subject to tax in Arkansas. Software delivered electronically or by “load and leave” are also not taxable in Arkansas. Delivered electronically refers to delivery by non-physical means (e.g., digital or wireless), while electronically covers technologies with electrical, digital, or similar capabilities. “Load and leave” means using tangible storage media for delivery without transferring the media itself to the customer.

The sale of custom computer software delivered electronically is not subject to tax in Arkansas or Oklahoma. Custom software delivered electronically or by “load and leave” in both Arkansas and Oklahoma is exempt from sales tax. Rules may vary by state, but in general, if the software is created and tailored specifically for a single customer and is not resold to other customers then the sale is considered custom, therefore nontaxable in both Arkansas and Oklahoma for sales tax purposes.

Digital Goods

States vary in their treatment of electronically delivered goods including e-books, music, and streaming video.  Some states consider all of these types of products to be taxable or not, while others call out specific taxability depending upon the product.

In Oklahoma, digital products are exempt. The state exempts most digital goods from sales tax, including e-books, music, streaming video, and other electronically delivered products.

In Arkansas, digital products are taxable. In contrast, Arkansas imposes sales tax on most digital goods including e-books, digitally delivered audio and audiovisual works and other downloadable digital products. Many digital goods are specifically enumerated as taxable under Arkansas law.

Sales Tax Holidays

States often offer sales tax holidays during specific times of the year, during which certain items are sold tax free. These holidays vary greatly by state. Here’s how Oklahoma and Arkansas shake out.

Oklahoma had a sales tax holiday on August 1st through 3rd on back-to-school clothing and footwear that is $100 or less per unit. For more information on the holiday, click here. https://oklahoma.gov/content/dam/ok/en/tax/documents/resources/publications/infographics/SalesTaxHoliday.pdf

Arkansas had a sales tax holiday on August 2nd to 3rd on back-to-school sales, which includes clothing and footwear that is $100 or less and clothing accessories and equipment that is $50 or less. It also includes school supplies, school art supplies, school instructional supplies and electronic devices. For more information on this holiday, click here. (https://www.dfa.arkansas.gov/office/taxes/excise-tax-administration/sales-use-tax/2024-sales-tax-holiday/)

For more information on sales tax holidays, click here.

Economy

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.

Oklahoma 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 in the U.S. Poultry and swine are its second and third-largest agricultural industries, respectively.

Arkansas’s earliest industries were fur trading and agriculture, with the development of cotton plantations in the areas near the Mississippi River. They were dependent on slave labor through the American Civil War.

Once a state with a cashless society in the uplands and plantation agriculture in the lowlands, Arkansas’ economy has evolved and diversified. Today, six Fortune 500 companies are based in Arkansas, including the world’s #1 retailer, Walmart. Tyson Foods, J.B. Hunt, Dillard’s, Murphy USA, and Windstream are all headquartered in the state. The state’s agricultural outputs are poultry and eggs, soybeans, sorghum, cattle, cotton, rice, hogs, and milk. Its industrial outputs are food processing, electric equipment, fabricated metal products, machinery, and paper products. Mines in Arkansas produce natural gas, oil, crushed stone, bromine, and vanadium.

Tourism is also very important to the Arkansas economy. The official state nickname “The Natural State” was created for state tourism advertising in the 1970s, and is still used today.  The state maintains 52 state parks and the National Park Service maintains seven properties in Arkansas. Many cities hold festivals, which draw tourists to Arkansas culture, such as The Bradley County Pink Tomato Festival in Warren, King Biscuit Blues Festival, Ozark Folk Festival, Toad Suck Daze and the Tontitown Grape Festival.

 Oklahoma Fun Facts:

  • More than 25 Native American languages are spoken in Oklahoma, third only to Alaska and California.
  • 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.
  • More than 500 named creeks and rivers make up Oklahoma’s waterways and with 200 lakes created by dams, it holds the nation’s highest number of artificial reservoirs.
  • The Oklahoma Tourism and Recreation department regards Cavanal Hill as the world’s tallest hill at 1,999 feet, and fails their definition of a mountain by one foot.
  • An average 62 tornadoes strike the state per year- one of the highest rates in the world. the
  • The first Girl Scout cookie sold in the U.S. was in Muskogee, Oklahoma in 1917.
  • The world’s first parking meter was installed in Oklahoma City on July 16, 1935.

Arkansas Fun Facts:

  • The community of Mountain View is called the Folk Capital of America. This little town preserves the pioneer way of life and puts it on display for visitors at the Ozark Folk Center State Park from March through October.
  • The state contains over 600,000 acres of lakes and 9,700 miles of streams and rivers.
  • Famous Singer Johnny Cash was born in Kingsland.
  • Sam Walton founded his Wal-Mart stores in Bentonville in 1962.
  • Mount Ida is known as the Quartz capital of the world.
  • Milk was officially designated as the official state beverage in 1985.
  • The Ozark National Forest covers more than one million acres.
  • The fiddle is the official state instrument and was designated in 1985.
  • The state park’s dominant natural feature is Pinnacle Mountain, which rises more than a thousand feet above the Arkansas River Valley. Tourists flock from all over the area to hike this mountain.
  • The state is home to the only active diamond mine in the U.S., located at Crater of Diamonds State Park, where visitors can search for real diamonds.

We invite you to further explore Oklahoma and Arkansas in these earlier blogs we crafted over the years. Our team at Miles Consulting Group is always available to discuss the specifics of your situation, whether in Oklahoma, Arkansas, 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.

https://milesconsultinggroup.com/blog/2021/01/19/focus-on-oklahoma-2/

https://milesconsultinggroup.com/blog/2022/02/11/focus-on-arkans/