State lawmakers consider reversing vehicle sales tax

Two bills filed in the past week would reverse course on Oklahoma’s automobile sales tax and scrap a revenue source introduced during last year’s budget crisis.

The identical Senate bills would end the 1.25-percent sale tax on vehicles bought after July 1, 2019. Oklahoma’s excise tax would remain.

“We’re in a different place financially, so I think it’s time to go back and look at this (sales tax),” said Senate Appropriations Committee Chair Kim David, R-Porter, author of Senate Bill 2.

The bills can be considered when the Legislature convenes in February.

David voted for the original legislation a year and a half ago, when Oklahoma was rushing to find new revenue. The state’s revenue picture has rebounded, however, especially after lawmakers approved tax hikes on cigarettes, fuel and the production of oil and gas.

Oklahoma collected $130.8 million from vehicle sales tax during the 2017-2018 fiscal year, according to the Oklahoma Tax Commission. Since July 1, consumers have paid more than $50 million.

State Sen. Julie Daniels filed the other legislation, Senate Bill 6, which contains identical language. She has opposed the tax since it was introduced.

“I see this as double taxation of an expensive purchase for the vast majority of Oklahomans,” said Daniels, R-Bartlesville.

Officially, sales tax has always been due on vehicle purchases, but a decades-old provision exempted automobiles from taxation. In a complicated move last year, lawmakers reduced the exemption amount so that customers would effectively pay 1.25 percent on each purchase.

Once consumers began paying the tax, legislators considered reinstating the full exemption for different groups like disabled veterans, commercial truck buyers and farmers. It might be more effective to eliminate the tax rather than create a litany of exceptions, David said.

Oklahoma is just one of eight states in the country that taxes vehicles based on the full price. Surrounding states only tax the trade-in difference, said Rose Morgan, executive director of the Oklahoma Independent Automobile Dealers Association. The group supports ending the sales tax.

“We’re surrounded by places where the taxation is different,” Morgan said. “Every dealer that comes to our counter is complaining about how slow things are.”