With the upcoming elimination of the state sales tax on groceries, Oklahomans will see a drop in their food bill.
House Bill 1955 eliminates the state’s 4.5% tax on groceries effective Aug. 29.
Local taxes will remain, such as those charged by cities.
The law does not prohibit cities from increasing their portion of the grocery tax.
“Yes, there is a possibility that cities and counties could look at raising their sales taxes after the state sales tax is eliminated,” said Dave Hamby, Oklahoma Policy Institute spokesperson. “But given the difficulty many local governments have in getting voters to approve sales tax increases, it is very unlikely to happen. And certainly not at a scale anywhere near the state’s 4.5% sales tax rate.”
According to the Tax Foundation, Oklahoma ranks sixth nationally in the combination of state and local sales tax rates. The maximum Oklahoma local rate is 7%.
The measure will not eliminate all state sales taxes in grocery stores.
Prepared foods, such as hot rotisserie chicken, will still be taxed. Dog food, hot deli soups, and toiletries will still be taxed as well as over-the-counter medications, beer, self-serve fountain drinks and sushi.
Frozen meals, fish, meats, baby food, candy, canned foods and potato chips will not be taxed.
According to the Oklahoma Policy Institute, a family earning $40,000 a year will save about $125.
A family earning more than $619,000 will save about $408 a year.
State revenues are expected to decline by slightly more than $370 million as a result of the measure, according to Oklahoma Tax Commission figures.
The highly-touted measure was years in the making.
Gov. Kevin Stitt said it was necessary to give families a break from inflation at a time when state coffers were seeing record savings.
He and House Speaker Charles McCall, R-Atoka, wanted additional cuts, such as an income tax reduction, but it failed to garner enough support in the Senate.
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