Fact check: Would Oklahomans still pay sales tax on groceries if lawmakers cut the grocery sales tax?

Q: Would Oklahomans still pay sales tax on groceries if lawmakers cut the grocery sales tax?

The Oklahoma Senate passed House Bill 1955 on Feb. 22 to eliminate the state portion of the sales tax on groceries. The House approved HB 1955 in March 2023, and the bill now goes to the governor, who is expected to sign it into law.
This bill eliminates only the state portion of the sales tax on groceries, which is 4.5 percent — or $3.83 on an $85 grocery bill.
Under these measures, Oklahomans buying groceries would still be paying city sales/use taxes (up to 5.5 percent) plus county sales taxes (up to 2.5 percent) depending on where they lived. Eliminating the state’s sales tax on groceries doesn’t mean getting rid of ALL sales taxes on groceries.
While state lawmakers could also eliminate the city and county sales taxes on groceries, but they would face enormous pushback from local leaders statewide.
Sales tax collections represent about half of all general revenue funds for most communities. Grocery sales taxes are the largest category of sales taxes collected by municipal government, according to the Oklahoma Municipal League. Preventing cities and counties from collecting its sales taxes on groceries would be catastrophic to communities statewide.
Lawmakers who support eliminating the grocery sales tax should make clear to their constituents that cutting the state portion of the grocery sales tax would not be a complete elimination of ALL sales taxes on groceries.

Modernizing Oklahoma’s Sales Tax Relief Credit — an existing credit that already helps offset some sales tax costs for low-income families — would cost the state $157 million annually, compared to $370 million annually to eliminate the state portion of the grocery sales tax.
The current credit amount — $40 per person in a qualifying household — has lost 60 percent of its buying power since it was established in 1990. The current value of the credit is not delivering the tax relief that lawmakers intended and that Oklahomans need.
To modernize the credit, lawmakers can:
- increase the credit amount from $40 to $200 per person; and
- allow single filers making less than $30,000 annually to claim the full credit amount, and phase the credit out by $40,000 annually; and
- allow families, seniors, and people with disabilities to claim the full credit amount up to $40,000 annually, with a full phase-out at $60,000 annually.

Under this proposal:
- At least 576,000 households across Oklahoma would be eligible for a tax reduction.
- Nearly 146,000 of those households would be newly eligible for the credit.
- More than 250,000 households with seniors would save on grocery sales taxes.
Expanding the Sales Tax Relief Credit would deliver 98.3% of the tax benefit to taxpayers making less than $76,000/year.
Finally, it also saves Oklahomans more money compared to eliminating the state share of the sales tax on groceries.

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Additional Resources from OK Policy:

Updated 02/22/24 to reflect passage of HB 1955 by the Oklahoma Senate.