Use tax revenues could shift government funding

Recent efforts to enforce Oklahoma's use taxes — those once obscure levies on goods bought online or out- of- state f or use here — seem to be paying off for state, county and municipal governments.

Whether t hey will be able to offset the slow performance of sales taxes, long a foundation of state and local government finances, remains to be seen. Policymakers are hopeful, though.

“In terms of overall revenue, they're only about 10%,” said James Wagner, Tulsa' s chief financial officer. “But when you're limited, it certainly has helped. Year-to-date, sales tax has grown about 2%. Use tax is up 11%.”

University of Oklahoma economist Robert Dauffenbach said the use tax revenue increases of recent years almost certainly can't be sustained, but steady growth of a few percentage points a year will make a difference in overall revenue.

According to figures from the Oklahoma Tax Commission, state and local use tax revenue jumped almost $180 million — or 35% — last fiscal year, and by nearly $275 million — or 66% — over the last two fiscal years.

During that same period, traditional sales taxes grew 16%, even with a nearly $280 million infusion from what amounted to a new tax on motor vehicle sales.

Without the $280 million, the increase was 9.3%.

The difference is even more noticeable over a longer time period. Since fiscal year 2009, state and local sales tax collections have increased 33%; without the additional car tax revenue it was only 25.4%, or about the rate of inflation.

During that same period, use tax collections more than doubled.

The big use tax revenue increase of the past two years was primarily triggered by two things: Amazon's agreement in April 2018 to begin collecting use taxes on goods sold through its platform, and a June 2018 ruling by the U.S. Supreme Court that online sellers must collect use taxes.

The tax commission has also stepped up some of its efforts to collect the taxes.

Until the advent of e- commerce, use taxes primarily applied to building materials and capital goods. They had little impact on the average person. And, despite the attention given e- commerce in the past decade, the original application is still the biggest source of use tax revenues.

According to figures provided by Dauffenbach, the state share of e-commerce use tax revenue more than tripled last year, from about $25 million to about $80 million. Total state use tax, however, amounted to $394.4 million, almost five times the e-commerce portion.

Traditional sales tax revenue still dwarfs use taxes. All state and local use taxes combined totaled $684.8 million in FY 2019, compared to $4.9 billion in state and local sales taxes.

And the most recent U.S. Census Bureau figures peg on-line retail sales at 11.2% of the total. It' s only a rough comparison because of differences in definitions, but Oklahoma's FY 2019 use tax from e-commerce appears to have amounted to about 3 percent of retail sales taxes and on-line use taxes combined.

Can use taxes shoulder more of the fiscal load from the sales tax work horse as more commerce moves online?

“It' s hard for us to know ,” said Wagner. “Consumer spending is what it is. There's only so much money. Will there be a shift from sales tax to use tax?”

For Oklahoma's town and cities, which depend almost exclusively on sales tax revenue to stay in business, and for the state itself, which gets almost half its general revenue from the same source, it' s more than a casual question.