Oklahoma City Blames Online Sales for Lost Tax Revenue

The city’s finance director said as much as $15 million in sales tax revenue is lost each year.

by William Crum, The Oklahoman / October 11, 2017
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(TNS) -- Online sales tax that goes uncollected costs Oklahoma City an estimated $10 million to $15 million in lost revenue each year, Craig Freeman, the city's finance director, told the city council Tuesday.

Freeman said the impact on the budget is significant and will increase as internet retailing grows, particularly among younger customers for whom "electronic forms of purchases are becoming the norm."

Under state law, cities in Oklahoma must rely on sales tax to cover day-to-day operating expenses for services such as police and fire protection.

Oklahoma City's general fund, the account for basic services, is about $400 million. Freeman said tax reform is needed if cities are to provide services at the levels residents expect.

"We need the tax system to modernize and keep up with this change in the way people do business," he said.

Freeman said U.S. Census data indicates online sales have grown an average of 10 percent annually over the past eight years and grew 15 percent in 2016.

One measure shows online sales comprise 12 percent of overall retail sales, he said.

Freeman said the trends are an indication "we're going to continue to see this growth and more and more of those sales are going to move away from sales tax we receive."

Oklahoma City voters last month approved a quarter-cent sales tax increase based on the council's promise to hire more police officers and firefighters.

Permanently adding a quarter-cent raises the city's sales tax rate above 4 cents for the first time, to 4.125 percent.

With state sales tax, the overall rate in most of Oklahoma City increases to 8.625 percent, slightly higher in Cleveland and Canadian counties.

Federal legislation to require online retailers to remit sales tax to local governments has been stalled for several years.

Ward 5 Councilman David Greenwell suggested drafting a letter on the council's behalf to Oklahoma's congressional delegation, to explain why sales taxes are due on retail purchases, whether made in-person or online, and why sales tax revenue is vital to cities.

Greenwell said he suspected anti-tax sentiment obscures the need for reform.

"The tax is owed, it's not being collected, there's a solution. Our congressional delegation refuses or fails to understand the importance of this and how it's impacting us," Greenwell said.

©2017 The Oklahoman Distributed by Tribune Content Agency, LLC.