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Adopting a County Sales Tax

County governments gained access to the sales tax in 1984 and in increasing numbers adopted (by vote of the people) a county sales tax to bolster sagging rev­enue streams for county government services.  As of 2014, 76 counties employ it with Oklahoma County being the one exception. His­torically, county governments relied heavily upon ad valorem tax levies, state transfer payments, and county fees set by the state constitution and statutes. In many cases, revenues from these sources have not grown as quickly as rising costs and the increasing demand for services. Lack of revenue growth may be attributed in part to the fact that counties have no authority to increase revenues.  County government is, in many respects, an arm of state government.  Tax rates and fees are set by the state legislature. Therefore, the only viable option whereby a county may raise a significant amount of additional money to continue current activities or to expand county government services is the adoption of a county sales tax. Oklahoma Cooperative Extension Service (OCES) rural development specialists work with county Extension professionals and county officials in collecting data for county financial trend reports and estimating the need for additional revenue. OCES also estimates county proceeds from various levels of sales tax and advises county leaders about the steps to take to put a sales tax proposal before the citizens.


Historical Perspective

From fiscal years 1984 to 2014, the average annual county increase in net assessed valuation (total taxable property) statewide was 3.8%.  Among the 77 counties, the annual rate of change varied from 0.7% to 6.5% and 75% of counties increased less than 5% per year and 25% of counties experienced increases of less than 3% per year. During the same 30 year period, inflation in the U.S. economy, as measured by the consumer price index, was 2.8% per year.  It would appear as though inflation and the increasing cost of various mandates (such as jail standards) have compelled counties to find additional funds and a county sales tax is the most viable vehicle.  In many counties, the historical foundation for financing county services – the ad valorem or property tax – has not kept up with rising prices.

Counties first acquired the authority to adopt up to a 2% county sales tax in 1984 (68 O.S. 1991, § 1370). With the decline in oil prices and oil production, coupled with the general eco­nomic recession of the mid- to latter 1980s, Oklahoma expe­rienced dramatic declines in economic activity and, conse­quently, property values. In response, some counties began to reduce their budgets, cut staff, deplete cash surpluses, defer replacement of equipment, and seek other methods to economize. Counties also began adopting the county sales tax. Twenty-seven counties were collecting sales tax in 1990. As of July 2005, the number had risen to sixty-nine counties and in 2014 stands at seventy-six counties with a county sales tax. Obviously, counties have identified and tapped into this funding mechanism.

Steps to Implement

Following are the good steps to take in preparation for a county sales tax election.


A. Define the Need

Analyze the historical trends in county revenue and expenditure streams. Examine the changing service needs of the citizens whether those services be directly voiced by citizens or are required by state and federal mandates. Can the desired and mandated services be supported by present and expected future revenues? If not, how much additional revenue is needed and what level of sales tax is needed? What is the cost-benefit ratio? In other words, at what point does the cost (sales tax collections) exceed the additional benefits (provi­sion of valuable services).


B. Form an Advisory Committee

This group oversees the process, helps make decisions about the amount and division of sales tax, works toward its passage, and (in some counties) monitors the expenditure of sales tax dollars after adoption of the tax. To form an advisory committee, the county officers should select a representative cross-section of citizens including many of the county’s lead­ing citizens. Representatives from all aspects of county government and all “stakeholders” such as the fair board, senior citizens, farmers, economic development commission, etc. should be included. Present the facts to them and get their feedback and advice. Be completely truthful and honest with them. Do not jeopardize your credibility. Compare and contrast their conclusions with those of the county officers. Be prepared to accept either conclusion: to proceed with a sales tax election or not to proceed. Does the advisory committee support a sales tax? If so, how much do they believe is needed? For what purposes should it be ear-marked?


C. Ear-Mark the Collections

State law requires that collections be designated for specific purposes. The amount or portion allocated to each purpose needs to be explained on the ballot so voters can see where their money is going. Taxpayers are more likely to support a tax increase if they know how the money will be spent and why it is needed. Political reality, therefore, suggests minimizing the amount allocated to vague uses such as “general fund.” Furthermore, in order to be success­ful, a county sales tax may need to serve a broad base of interests in the county, i.e., senior citizens, roads, county facilities, etc.


D. Educate the Public

With the help and guidance of the advisory committee, produce brochures, news releases, and other materials to show the need and proposed solution to the public. County officers and advisory committee members may jointly or indepen­dently hold public meetings, speak at civic clubs, be available for questions, etc. Speakers must have a clear understanding of the fiscal problem, the alternative solutions, and the pro­posed solution. They should be able to articulate this informa­tion to the public.


E. Promote the Sales Tax

An organized promotion campaign stemming from the citizens’ advisory committee will be helpful. It is not ethical for OCES or elected officials to actually campaign for and promote a biased interest.  Their appropriate role is to present the facts and educate.  However, if a citizens group is formed to collect donations, place newspaper and telephone ads, speak to civic clubs, or even go door to door, the sales tax will have a better chance of being adopted.


F. Hold the Election

Call for and hold the elec­tion in keeping with the law. Legal aspects of holding such an election are described be­low.  The time required for steps A through F may vary from county to county but it is prob­ably prudent to expect six months or more.


G. Use Funds Responsibly

Be accountable for the additional funds that the taxpay­ers have paid and entrusted to the county. Through careful record keeping, be able to show citizens, especially the citizen’s advisory committee, that the funds were used as specified and used well. Most county sales taxes are adopted for a limited time, such as five years. If a sales tax needs to be renewed, citizens will want to know if sales tax dollars were put to beneficial use in the past.

H. Other Practical Ideas

  • County officials and the advisory committee must work together to present a "total package" to the voters without dissension. Dissension tends to cause voters to doubt the need for or the appropriate use of a sales tax. 
  • Representatives of a citizens' advisory committee should be carefully chosen. They should represent a cross-section of the populace. They should be objective, public-minded, and trusted people of integrity. If such a committee is selected and they reach the conclusion that a county sales tax is needed, the committee becomes a primary reason for the public to vote in favor of the new tax. 
  • Once a sales tax is in place, citizens will observe how their money is being spent, so marketing, visibility, and accountability are important. 

Although county government is limited to a maximum of 2%, the citizens of incorporated cities and towns may adopt any sales tax rate. The municipal sales tax is in addition to the 4.5 percent levied by the State. Hence the total sales tax in any particular place in Oklahoma equals 4.5% plus the city rate (if any) plus the county rate (if any). Title 68, sections 1370 – 1374 of the Oklahoma Statutes contains the law regarding county sales tax. The principle provisions are as follows:


Majority Vote

A sales tax must be approved by a majority of voters at a special election called for by the Board of County Commis­sioners or by initiative petition. If by initiative petition, it must be signed by at least 5% of the registered voters of the county who were registered at the time of the last general election. If the sales tax fails to pass, the county commissioners must wait six months before calling for another sales tax election. If a county wishes to repeal a sales tax, this is accomplished at a special election called for in the same fashion described above.

Designated Purpose

Sales tax dollars must be designated for a particular purpose(s). Purposes may include but are not limited to economic development; general operations; capital improve­ments; county roads; or any other purpose deemed by a majority of the county commissioners to be necessary to promote safety, security, and the general well-being of the people. The county shall identify the purpose of the sales tax when it is presented to the voters. If the designated purpose of the sales tax is to retire indebtedness incurred for the specific purpose for which the sales tax is imposed, the sales tax shall not be repealed until the debt is retired. Sales tax monies may only be expended for the purposes specifically designated.


The life of the tax may be limited or unlimited. The county identifies the duration when it is presented to the voters. That is, the duration is shown on the ballot. Most counties have adopted a five-year period. Citizens of many counties have voted to renew or extend the tax another five years.


The proceeds of any sales tax levied by a county shall be deposited in the general revenue and/or sales tax revolving fund(s) of the county. Whether the proceeds are deposited in the general fund or revolving fund(s), the amounts designated for each purpose shall be accounted for separately to ensure that the proceeds are expended as authorized by the voters and the end of year balance is not lost; rather it remains available for the designated purpose.Separate revolving funds may, at the county’s option, be set up for each designated purpose. For example, if designated purposes are county roads, county library, and free fair, then a revolving fund could be established for each. Revolving funds are continuous funds not subject to fiscal year limita­tions. In particular, any balance in a revolving fund at the end of a fiscal year is carried forward in that fund into the next fiscal year. The end of year balance is not lost; rather it remains available for the designated purpose.  Finally, it is important to note that any interest earned by investment of earmarked sales tax monies must be credited to the account/fund that provided the funds being invested.

Maximum Percentage

Any county may levy up to a 2% county sales tax for the purposes and duration described above. In addition, counties whose population exceeded 300,000 in the latest decennial census (Tulsa and Oklahoma Counties) may levy specified amounts for specified purposes for specified periods of time. These are detailed in Title 68, sections 1370.1 – 1370.7. Typically, these sections provide for up to a one percent sales tax for no more than three years. For example:

a. Up to one percent for no more than three years for qualified aircraft maintenance or manufacturing facilities,

b. Up to one percent for no more than three years for acquisition and development of qualified manufacturing facilities,

c.  Up to one percent for no more than three years for development of facilities for lease or conveyance to the government of the United States.

One should refer to the statutes to learn the additional restrictions and specifications applicable to each of the spe­cial cases listed for Tulsa and Oklahoma counties.

Table 1. Detailed Outline of the Technical Steps for a County to Take Before and After the Election

Table 1

Other General Provisions

The same items subject to state sales tax shall also be subject to county sales tax. The same items exempt from state sales tax shall also be exempt from county sales. One percent of the gross collections (decreasing to 0.5% effective July 1, 2015) are kept by the Oklahoma Tax Commission for the service of collecting and distributing the tax.

How Counties Use Sales Tax Dollars

For many fiscal years, OCES compiles and publishes a report showing how each and every county government uses its sales tax.  These reports can be found at OSU Ag Econ Extension County Training ProgramLook for the title, “County Sales, Use, & Lodging Tax Summary Report, FY__.”


Counties in Oklahoma have increasingly turned to the county sales tax as the most viable alternative for bolstering lagging revenues for county government services. This paper gives a brief review of the revenue problem then explains the process by which many counties have adopted a county sales tax. The legal requirements are summarized. Finally, a summary table of critical steps to take, before and after the election is presented. Counties considering a sales tax for the first time and counties seeking to renew their sales tax may find this information to be useful and instructive.

Notie Lansford

State Extension Specialist


Sherri Schieffer

Local Government Specialist

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