Taxation in Oklahoma

Taxation in Oklahoma takes many forms. Individuals and corporations in Oklahoma are required to pay taxes or fee charges to both levels of government: state and local. Taxes are collected by the government to support the provisions of public services. The Oklahoma Constitution vested the authority to levy taxes with the Oklahoma Legislature while the Oklahoma Tax Commission is the primary Executive agency responsible for collecting taxes.

The most significant forms of taxation are income tax, sales tax, excise taxes, and property tax.

Taxes based on income are imposed at the State level, both on individuals and corporations. Oklahoma first enacted an individual income tax in 1915 and then a corporate income tax in 1931. Income taxes are steadily increased as a major State revenue source since 1933 when the Oklahoma Constitution was amended to prohibit State-level taxation of property.

Income taxes are now the largest source of revenue for the State government, accounting for approximately 36% of total state revenue.

Oklahoma has adopted a progressive income tax for individuals, in which the tax rate increases as the amount of personal income increase:

The corporate income tax rate is a flat tax of 6% for all corporations, regardless of earnings. When established in 1931, the corporate income tax was progressive but became flat in 1935.

Both individual and corporate income taxes are earmarked by the Oklahoma Legislature to support specific state agencies and/or funds:

The State sales tax and use tax was first enacted in 1933 as a temporary one percent tax for the support of public schools. Two years later, the tax was renewed with revenues being deposited into the state General Fund. In 1939, the sales tax rate was increased to two percent with the revenues being used to fund public assistance programs. This remained unchanged until the 1980s when the revenues were redirected back to the General Fund. Additionally, throughout the 1980s, the tax rate was gradually increased from two percent to four percent. In 1990, the passage of the “Education Reform Act” increased the State sales tax rate to its present four and a half percent.

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