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Among other items and recommendations, Oklahoma Gov. Brad Henry's recently released budget for fiscal year 2011 includes a number of income, franchise, sales and use, motor fuels, and tobacco products tax proposals. These tax proposals are briefly addressed below.
Income Tax Proposals
Repeal and reform of credits: Under the proposed budget, the corporate and personal income tax credit for investments in qualified small business capital companies and qualified small business ventures, as well as the credit for investments in rural small businesses in Oklahoma, would be repealed.
The governor also proposes revisions to the credit for the conversion of motor vehicles to clean burning fuel or investments in qualified electric motor vehicles.
In addition, a one-year moratorium on income tax credits for the 2010 tax year is proposed.
Decoupling from mortgage forgiveness provisions: As a part of the federal American Recovery and Reinvestment Act, forgiven mortgage debt under certain temporary tax provisions is excluded from taxable income for federal income tax purposes. A proposal would, for Oklahoma income tax purposes, consider that debt forgiveness amount to be taxable income, thereby decoupling from the federal tax provisions.
Due and Delinquent Dates for Franchise Tax Returns
Under current law, a franchise tax return must be remitted on July 1 or the last day of the income tax year of the taxpayer. The return is delinquent if not filed by September 1 or the 15th day of the fourth month following the end of the income tax year. The governor proposes to change those dates so that returns and payments from taxpayers paying the maximum tax amount would be captured in June, thereby creating a one-time increase in franchise tax collections for the 2011 fiscal year.
Sales and Use Tax Proposals
Sales and use tax-related proposals for fiscal year 2011, as outlined in the governor's budget, include the following:
-- to equalize the vendor discount at 1% for all vendors and cap the per-vendor maximum monthly compensation at $2,500 per month (currently, the monthly cap is $3,300 per month and the vendor discount is given at rates of 1.25% and 2.25%);
-- to impose sales tax on sales of items delivered electronically that would be subject to sales tax if delivered in a tangible form;
-- to require vendors that remit between $1,000 and $2,500 per month to remit sales tax on the 20th of the month for sales made during the 1st through the 15th instead of for sales made during the previous month;
-- to require liquor and wine wholesalers to remit sales tax on the 20th of each month for sales during the 1st through the 15th instead of remitting the tax on the 10th of the month for sales made during the previous month;
-- to require beer wholesalers that remit sales tax on 10th of the month for sales during the previous month in the amount of $2.3 million to remit tax on the 20th of the month for sales made during the 1st through the 15th;
-- to implement a compliance initiative to allow the Oklahoma Tax Commission to pursue sales tax collections from out-of-state businesses without a presence in Oklahoma that are not collecting sales tax on Internet, phone, and mail order sales made to Oklahoma; and
-- the adoption by the commission of the Multistate Tax Commission's model sales tax statutes requiring Internet accommodations intermediaries that book accommodations on a nonexclusive basis to collect sales tax on the entire retail price (including the margin).
Proposed Repeal of Motor Fuel "Eligible Purchaser" Discount
Since a motor fuel distributor no longer has any tax remitting responsibility, the current 1.6% discount for a gasoline distributor and the 1.9% discount for a diesel distributor, granted for a timely tax payment, would be repealed under the proposed budget.
Proposed Smokeless Tobacco and Little Cigar Tax Equalization
The governor also proposes converting the current tobacco products tax on moist smokeless tobacco from a value-based tax to a weight-based tax, so as to equalize the rate of taxation among similar tobacco products.
Under the budgetary proposals, a product falling within the "little cigar" statutory category would be taxed at the same tax rate as a cigarette, thus conforming Oklahoma law to the federal provisions that became effective April 1, 2009.
Proposed Increase to the Cost of Vending Machine Decals
Finally, under the proposed budget, the owner of a vending machine would have to purchase an annual decal at a cost of $150 per year. The current cost is $50 per year.
FY-2011 Executive Budget, Oklahoma Gov. Brad Henry, February 1, 2010
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