Oklahoma residents will soon get some sales tax relief on their grocery bill. Gov. Kevin Stitt recently approved a bill that eliminates Oklahoma sales tax on groceries. The bill, however, is likely to be effective starting in August.
Oklahoma sales tax on groceries eliminated
A couple of weeks ago, Gov. Stitt signed a bill (House Bill 1955) that eliminates the state’s 4.5% tax on groceries. The bill was passed with near unanimous support in the Legislature.
The elimination of the tax is estimated to save the average Oklahoma household about $700 a year, but it is estimated to reduce the state revenue by $418 million a year.
“To us in leadership, the grocery tax was one of the most regressive taxes that we had,” Gov. Stitt said. “It affected people on the lower income bracket much more than people that made a lot of money.”
Gov. Stitt called eliminating the Oklahoma sales tax on groceries “the largest single-year tax cut” in state history. Further, the governor said that people in the southern part of the state told him they buy their groceries from Texas to avoid taxes.
“So since 2019, I’ve been talking about eliminating this grocery tax to bring people back home here,” he said.
It must be noted that HB1955 only eliminates the state tax on groceries and not the local sales tax on groceries. However, the bill prohibits cities and counties from raising the tax until July 1, 2025. The local sales tax on groceries could be as high as 7% in some parts of the state.
Moreover, ready-to-eat food items, such as warm pizza and fruit bowls, are not tax-exempt, and heated foods will be taxed at the current rate.
What’s the need?
Prior to Oklahoma eliminating the sales tax on groceries, it was one of only 13 states to tax groceries. Also, its sales tax rate was among the highest, with only three other states – Mississippi at 7%, Kansas at 6.5%, and Idaho 6% – having a rate higher than Oklahoma and South Dakota (both had a grocery tax rate of 4.5%).
Other states with sales tax on groceries are – Alabama (4%), Hawaii (4%), Virginia (2.5%), Utah (1.75%), Arkansas (1.5%), and Missouri (1.23%). Illinois Gov. J.B. Pritzker recently introduced a 2025 budget proposal to eliminate the grocery tax.
Eliminating sales tax on groceries not only reduces grocery bills for households but also helps to fight inflation. Americans now are spending more of their income on food than they have in the last 30 years, according to USDA data. Moreover, food prices have soared at a faster pace than housing, medical care, clothing, and education in the last four years.
Though HB1955 was signed in February, it will take effect 90 days after the Legislature adjourns, likely in late August.
