Oklahoma Sales Tax Code amended to provide exemptions for certain business-to-business sales of tangible property

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On May 3, 2021, Governor Kevin Stitt signed HB 1060, which amends the Oklahoma Sales Tax Code. Oklahoma levies a state sales tax of 4.5% on the gross proceeds received from all sales of tangible personal property unless otherwise exempt by statute. Sales are also subject to the levy of city and county sales taxes occurring within their boundaries.

Exemptions exist in the Sales Tax Code for certain business-to-business sales between corporations, partnerships or limited liability companies, but are limited to sales pursuant to a merger, reorganization, or dissolution. The signing of HB 1060 creates new exemptions for sales of tangible personal property between “wholly owned subsidiaries of a parent company” and sales between “a parent company and its wholly owned subsidiary.” The exemption would apply to all sales of personal property between these entities, including the renting and leasing of personal property.

The Oklahoma Use Tax Code levies a tax of 4.5% on the purchase price of tangible personal property purchased out-of-state and brought into this state for use, storage or consumption. Use tax is a complementary tax to the sales tax and does not generally apply if sales tax was charged by the seller. Similarly, use taxes are levied by most cities and counties that levy a local sales tax.

The Use Tax Code provides that the use tax does not apply to the use of tangible personal property that is exempt from the sales tax. Therefore, the exemptions authorized under HB 1060 would apply to the levy of use tax also.

The bill is effective November 1, 2021, and will apply to applicable sales occurring on or after that date. The Enrolled version of the bill can be found here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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