Arielle Cruz
In Oklahoma, the tax landscape for food and alcohol is complex. While the state has eliminated its grocery tax, local sales taxes on food still apply, and these vary across the state. Food purchased at restaurants or with utensils provided is considered prepared food and is subject to state sales tax, which can be as high as 7%. Additionally, Oklahoma levies a 13.5% mixed beverage tax on all sales of liquor, wine, and beer, and liquor vendors pay a state excise tax of $5.56 per gallon, plus federal excise taxes. Understanding the tax obligations on food and alcohol in Oklahoma requires navigating both state and local regulations, with potential exemptions and discounts influencing the final tax burden.
| Characteristics | Values |
|---|---|
| State sales tax on food and food ingredients | 0% |
| State sales tax exemption on | Milk, soft drinks in a bottle or can, baby food, fruits and vegetables, potato chips, fish and meats, herbs and spices, frozen meals, pasta, flour, etc. |
| State sales tax applicable on | Alcoholic beverages, beer, dietary supplements, self-serve fountain drinks, rotisserie chicken, pet food, vitamins, toiletries, over-the-counter medications, and food made by the seller (e.g. birthday cakes, sushi, sandwiches, deli, and salad) |
| State sales and use tax | 4.5% |
| Alcoholic beverage tax | 13.5% |
| Alcoholic beverage wholesale tax | 0.5-2 cents per ounce |
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What You'll Learn
Groceries are exempt from state sales tax
In Oklahoma, the definition of food and food ingredients eligible for the sales tax exemption includes bottled water, candy, and soft drinks. However, certain unhealthy food and drinks, like soda, may not be eligible for reduced sales tax rates. The exemption also applies to food that requires further preparation, such as cooking, by the customer. This includes raw steaks from a butcher shop or meat market, which need to be cooked to prevent food-borne illnesses. Similarly, food that is only cut, repackaged, or pasteurized by the seller, like meat from a deli counter or fruit sliced and packaged into containers, is exempt from sales tax.
Food sold in an unheated state by weight or volume as a single item is also exempt, as long as eating utensils are not provided by the seller. For example, a deli selling potato salad in uniform containers at a standard price per container would not be exempt from state sales tax. On the other hand, a take-and-bake pizza sold without eating utensils would be exempt. Additionally, food and food ingredients sold by retailers, such as canned vegetables and dairy products, are generally considered exempt when purchased by the final consumer.
While groceries are exempt from state sales tax in Oklahoma, it's important to note that local sales taxes may still apply. Additionally, there are specific rules and exemptions for different types of food and beverages, as outlined in the Oklahoma Product Guide. For example, food purchased at restaurants or prepared food, such as birthday cakes, sushi, sandwiches, and deli salads, is typically subject to state sales tax. Oklahoma also has sales tax holidays, during which certain items can be purchased tax-free, and sales tax exemption permits for certain eligible purchases.
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Alcoholic drinks are taxed at one-half to two cents per ounce
Alcoholic drinks are subject to various taxes in Oklahoma. Beer, wine, and liquor are taxed at rates between one-half cent and two cents per ounce. These taxes are typically paid by wholesalers to the Oklahoma Alcoholic Beverage Laws Enforcement Commission and are included in the retail price of the beverage. In addition to the wholesale tax, there is a 13.5% tax on mixed drinks served at bars and restaurants. This is known as the mixed beverage tax, and it applies to all alcoholic drinks served by establishments holding a Mixed Beverage License.
The various alcoholic beverage taxes are distributed differently among various levels of government. The state general revenue fund receives all of the low-alcohol beer tax and mixed drink tax, as well as about two-thirds of the taxes on other beverages. The remaining taxes are allocated to counties and cities based on their share of the state's population.
It is important to note that alcoholic beverages are not exempt from the state sales tax in Oklahoma. The sale of alcoholic beverages, along with prepared food and dietary supplements, is subject to the full state sales and use tax rate of 4.5%. This tax rate applies to food purchased at restaurants, considered "prepared food," in addition to any locally levied sales tax.
While customers with a valid sales tax exemption permit are exempt from paying sales tax on alcoholic beverages, they are still subject to the mixed beverage tax on their purchases. Additionally, all complimentary alcoholic drinks are subject to the mixed beverage tax.
Oklahoma has recently made changes to the taxation of food and food ingredients. As of August 2024, the state sales tax rate on food and food ingredients has been reduced to zero percent. However, this zero-tax rate does not apply to alcoholic beverages, which remain subject to the taxes mentioned earlier.
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Prepared food is taxed, but food and food ingredients are not
In Oklahoma, there is a distinction between "prepared food" and "food and food ingredients" when it comes to taxation. While prepared food is generally subject to the full state sales and use tax rate of 4.5%, food and food ingredients are exempt from this tax. This exemption was introduced by a bill signed by the governor of Oklahoma, which reduced the state sales tax rate on food and food ingredients to zero percent.
So, what constitutes "prepared food" versus "food and food ingredients"? Prepared food refers to food that is intended for immediate consumption, either on or off the premises of the seller. This includes food made by the seller, such as birthday cakes, sushi, sandwiches, deli items, and salads. It also includes certain items from grocery stores, such as rotisserie chicken, self-serve fountain drinks, and hot food items. These items are typically taxed at the full state sales and use tax rate.
On the other hand, "food and food ingredients" typically refer to "grocery store food items." This includes foods made and packaged by a manufacturer or processor and fresh, raw food purchased from a bulk vendor or local seller, such as a farmer's market. Examples include milk, bottled soft drinks, baby food, fruits, vegetables, potato chips, meats, herbs, spices, frozen meals, pasta, and flour. These items are exempt from the state sales tax, meaning consumers do not pay any additional tax on top of the listed price.
It's worth noting that alcoholic beverages are taxed separately and are not included in the definition of "food and food ingredients." Alcoholic beverages, including beer, wine, and liquor, are subject to various excise taxes and wholesale taxes. These taxes are typically paid by wholesalers and included in the retail price of the beverage. Additionally, there is a 13.5% tax on mixed drinks served at bars and restaurants, which is included in the final bill.
While Oklahoma's taxation system can be complex, the fundamental distinction lies in the preparation and intended consumption of the food items. "Prepared food" indicates readiness for immediate consumption and is taxed, whereas "food and food ingredients" refer to items typically purchased at grocery stores or farmer's markets, which are not subject to the state sales tax.
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Local sales tax can be added on top of state sales tax
Oklahoma has a complex system of sales tax, with some items subject to different rates depending on whether they are purchased at a grocery store or a restaurant. The state sales tax rate is 4.5% and applies to the sale of prepared food, alcoholic beverages, and dietary supplements. However, some items are exempt from this tax, including raw foods such as meat, fish, and eggs, which require cooking to prevent food-borne illnesses. Additionally, food that is only cut, repackaged, or pasteurized by the seller and sold by weight or volume without eating utensils is also exempt.
Food and food ingredients purchased at grocery stores are typically exempt from state sales tax, but local sales tax may still apply. This includes items such as bottled drinks, baby food, fruits, vegetables, potato chips, meats, and flour. On the other hand, prepared food, such as food purchased at restaurants or some premade supermarket items, is subject to the full state sales tax rate of 4.5%. Local sales tax can be added on top of this, resulting in a higher total tax amount for these items.
Alcoholic beverages are subject to various taxes in Oklahoma. Beer, wine, and liquor are taxed at rates between one-half and two cents per ounce, and these taxes are included in the retail price. Additionally, there is a 13.5% tax on mixed drinks served at bars and restaurants, which is known as the mixed beverage tax. This tax is paid by wholesalers to the Oklahoma Alcoholic Beverage Laws Enforcement Commission.
It is worth noting that Oklahoma does not have a Value Added Tax (VAT). Instead, the sales tax only applies to the end consumers of the product. This means that businesses can purchase goods without paying sales tax and then voluntarily list their liable purchases on an Oklahoma Use Tax Return, which is attached to their income tax return.
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Tax exemption forms can be used for certain purchases
In Oklahoma, certain purchases are exempt from the state sales tax. These include food and food ingredients, which are typically defined as "grocery store food items." This means that items like milk, soft drinks in bottles or cans, baby food, fruits and vegetables, potato chips, fish and meats, herbs and spices, frozen meals, pasta, flour, and bottled water are exempt from state sales tax. However, it's important to note that this exemption does not include alcoholic beverages, dietary supplements, prepared food, or restaurant meals, which are subject to the full state sales tax rate of 4.5%.
Additionally, there are specific cases where certain prepared foods are exempt from state sales tax. These include food containing raw eggs, fish, meat, or poultry that requires cooking to prevent food-borne illnesses, food that is only cut, repackaged, or pasteurized by the seller, and food sold in an unheated state without eating utensils provided by the seller.
While food and food ingredients are exempt from state sales tax, they are still subject to local sales tax. This means that purchases made within city, county, or district limits may still incur a sales tax, even for exempt items.
When it comes to alcohol, beer, wine, and liquor are subject to excise taxes, which are paid by wholesalers and included in the retail price. Additionally, there is a 13.5% tax on mixed drinks served at bars and restaurants. These alcoholic beverage taxes are distributed to the state general revenue fund, counties, and cities based on population.
To claim tax exemptions on eligible purchases, individuals can download and utilize tax exemption forms from the Oklahoma Tax Commission. These forms allow individuals to legally avoid paying sales tax on certain purchases that qualify for tax exemption, such as the recently implemented exemption for food and food ingredients. It's important to note that tax exemption forms are typically intended for specific situations and may not apply to all purchases or individuals.
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Frequently asked questions
Food and food ingredients are typically exempt from state sales tax in Oklahoma. However, food purchased at restaurants or prepared food, such as birthday cakes, sushi, sandwiches, deli, and salad, is subject to state sales tax, typically at a rate of 4.5%.
Alcoholic beverages in Oklahoma are taxed at rates between one-half and two cents per ounce. There is an additional 13.5% tax on mixed drinks served at bars and restaurants. Beer is also taxed differently, with "3.2 beer" taxed at 11.25 per 31-gallon barrel or about 20 cents per six-pack.
Yes, certain food items that require further preparation, such as raw steaks or meat that needs to be cooked, are exempt from state sales tax. Additionally, customers with a valid sales tax exemption permit are exempt from sales tax on alcoholic beverages but are still subject to the mixed beverage tax.
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