Guest column: The Use Tax and You
By Doug Enevoldsen, Sand Springs City Manager
Published with permission from the Sand Springs Leader:
Wednesday, February 17, 2010 3:27 PM CST
A few weeks ago, in response to a suggestion from a local businessman who is active in civic affairs, I wrote a column about assuring that retailers in other cities collect and remit Sand Springs’ sales tax when delivering items to a local address. Under state law, sales taxes are paid based on the point where items are delivered, and our community can benefit if citizens take a moment when purchasing items to make sure the retailer is charging the proper sales tax.
I noted in that column that the City, county and state also collect a “use tax” on goods purchased in other states and delivered to local residents without sales taxes being paid on those goods. Although it has been around locally for more than two decades, I understand the use tax is a mystery to most citizens, and believe it is worthy of explanation.
A few years ago, a means for collecting use tax payments began appearing on Oklahoma individual income tax forms, which provides individual taxpayers a practical (albeit somewhat complicated) way to meet their statutory obligation to pay their state and local use liability. This is also another opportunity to help our community with a few extra moments of your time.
Many out-of-state retailers that have a physical presence in Oklahoma already collect and remit applicable sales taxes when you make purchases through their out-of-state sources. The use tax typically applies to internet, catalog, television shopping network, mail order or other types of purchases made from out-of-state retailers that do not collect Oklahoma sales taxes on your purchases.
Some of the commonly purchased items subject to use taxes include books, CDs and DVDs, computer equipment and software, electronics, clothing, home improvement items, jewelry and sporting goods.
There are two ways citizens can figure use taxes. They can use a use tax table included in their 2009 income tax instruction book that’s based on a person’s income. Or, they can figure their use tax based on their purchases using worksheets included in the instruction book.
Sand Springs’ use tax rate is the same as its sales tax rate – 9.017 percent for Tulsa County residents and 9.25 percent for Osage County residents. In addition to the City’s 3.5 percent use tax, the state collects 4.5 cents, and Tulsa and Osage counties collect 1.017 and 1.25 cents respectively.
All of this may sound a bit complex and confusing, and if I had my druthers, would not be a system on which local governments would be required to depend for funding basic public services. However, it is the law in Oklahoma and the system that we must currently work within.
I and others are actually encouraging state policy makers to authorize local governments to access a more diverse set of funding sources, as well as assure that those funds due us are being properly collected and remitted. As I stated, until then, we must work with what we are given to access every tax dollar to which we are legally entitled.
Sales taxes (2 cents of every dollar) generated by purchases at local merchants still generate the bulk of funding for Sand Springs’ general government – things like public safety, streets and parks. There are also earmarked sales tax funds for water and sewer capital improvements (1 cent), as well as street improvements (½ cent). And, shopping at local merchants keeps money at home and rewards our retailers who have taken risks and invested in our community to make goods and services available here.
Use taxes generate around $250,000 annually for the City of Sand Springs. But as internet purchases and other sales involving out-of-state merchants grow, it is vital that state policymakers devise better systems available to remit the taxes that are lawfully due the state, counties and municipalities. It is estimated that this year alone, unreported taxes on internet sales will cost all governmental entities in Oklahoma around $106 million, an amount which is growing rapidly.
So as you complete your Oklahoma taxes this year, take a moment to figure your use taxes at Sand Springs’ tax rate. You’ll be following the law and helping your community sustain its quality of life. Thank you for doing your part.