OKC sees payoff from online sales taxes

Oklahoma City City Manager Jim Couch calls them “crazy numbers.”

Use tax receipts were up sharply in September and October from the same time a year earlier, driven by increases in sales tax collected on online shopping.

Sales tax remitted by Amazon.com and by third-party vendors selling through Amazon, helped along by a favorable U.S. Supreme Court ruling, are contributing to the surge.

Use tax collections in Oklahoma City were up 49.9 percent over October 2017 in figures reported this week, to $6.4 million. The bump was even higher, 63.2 percent, in September.

That compares to an overall increase in sales tax collections — that is, sales tax paid by shoppers at retail stores in Oklahoma City — of 9.7 percent in October.

Use tax is sales tax levied on products purchased elsewhere and shipped into Oklahoma.

For instance, sales tax owed when an Oklahoma City resident buys a shirt online, it is categorized as use tax in the city’s accounting system.

Use tax also is due on major purchases, such as when a farmer orders a tractor from John Deere in Iowa and has it shipped into Oklahoma.

Local shopping still accounts for the vast majority of sales tax revenue. Shoppers at Oklahoma City stores paid $39.4 million in sales tax in the October reporting period, compared to the $6.4 million in use tax levied on online and other out-of-state purchases. Still, the share of use tax compared to the share of traditional sales tax is rising.

The U.S. Supreme Court this year, in a South Dakota case, ruled businesses that ship products into a state where they do not have a physical presence can be required to collect and remit sales tax.

Couch said that ruling is contributing to changes as more online retailers charge sales tax.

Cities throughout Oklahoma must, under state law, rely on sales tax for everyday operating expenses.

In Oklahoma City, that means services such as police and fire protection depend on sales tax.

October sales and use tax results are based on shopping the last two weeks of August and first two weeks of September, encompassing the backto-school period.

Budget Director Doug Dowler said sales tax revenue was up by $3.5 million from October 2017, hitting the general fund budget target for the month.

Through the first four months of the fiscal year, sales tax revenue is 1.7 percent above projections. Results reflect underlying growth of 3 percent in economic activity over this time last year, Dowler said.

October is the 18th consecutive month of year-over-year growth in sales tax revenue in Oklahoma City.