Budget & Tax
Where does Oklahoma rank on sales tax?
July 25, 2018
The Tax Foundation continues its series on state and local tax collections with sales tax collections. While most states (except for Delaware, Montana, New Hampshire, and Oregon) levy a sales tax, there is wide variance in how the sales tax is applied. A statewide sales tax is the most common; however, there are some states that only levy sales taxes at the local level. There is also a varying degree of exemptions throughout the states on certain types of goods such as groceries.
In Oklahoma, sales taxes make up a much larger share of total tax collections than property taxes. According to the data, Oklahoma relies on sales taxes for 33% of its total state and local tax collections, ranking us 12th nationally. As shown in the chart below, this is similar to most other states in the region. Arkansas leads the region with 37% of total tax collections coming from sales taxes while Missouri brings in less than 27%.
|State||Sales Tax as a Percentage of Total Tax Collections||National Rank|
Just as neighboring businesses compete with each other, so do states. A state with a low sales tax rate applies pressure to surrounding states to not increase their rate to an uncompetitive level. However, even some states with lower sales tax rates can bring in a similar amount of revenue relative to their total tax collections if they have a broader tax base. Allowing multiple exemptions to different industries narrows the tax base and requires a higher tax rate to make up for the lost revenue. This can create distortions in the market and provide an industry an unfair advantage. A sales tax with a low rate and broad base allows for the most freedom in the market while creating a stable revenue base for state government.