Sales Tax Exemptions: A Puzzling Roster of Haves and Have-Nots

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U.S. Coins imageThe National Rifle Association is exempt from the sales tax in Oklahoma. The American Civil Liberties Union is not.

Organizations promoting the preservation of wild ducks and turkeys get a sales tax break. Groups promoting different wildlife, or the welfare of dogs and cats, do not.

Oklahoma chapters of the Daughters of the American Revolution have a specific sales tax exemption. The League of Women Voters of Oklahoma does not.

Those are just a few of the idiosyncrasies in the state’s sales tax statutes. Altogether, the tax code contains 150 specific sales and use tax exemptions. About a third of them apply to charities and other nonprofits engaged in activities rewarded with a tax break.

There are so many of them that the Oklahoma Tax Commission created a special application packet for groups applying for a break. Just check the box of the exemption you’re seeking, and send it in with the necessary documentation. If you’re a church, supply your IRS 501(c)3 certification and a copy of your newsletter or meeting announcements. If you’re a private school, proof of accreditation will suffice.

However, the state seems inconsistent in the manner in which it hands out sales tax breaks.

Just because an organization is nonprofit and exempt from federal income taxes under Section 510(c)3 of the IRS code does not make it automatically exempt from the state’s 4.5-cent sales tax or additional city and county levies, which can push the tax tab as high as 10 percent.

WildCare Oklahoma in Noble is an example. Every year, it takes in about 6,000 wounded or orphaned mammals, birds and reptiles, nurses them back to health and shelters them long enough to be released into the wild again. It has a 501(c)3 federal tax exemption, but it doesn’t get a state sales tax break.

Last year, WildCare spent about $200,000 on species-specific animal feed and other sales-taxable goods. A sales tax exemption would have saved it well over $10,000.

“It sure would help us,” said WildCare Director Rondi Large.

Large said she checked into the issue, and was told she didn’t qualify for a general agricultural tax break because she didn’t sell animals for profit. Since she doesn’t specialize in wild ducks and turkeys, she doesn’t qualify for that break either.

“Seeing as the wildlife and the birds are all protected, if I sold them I’d be in jail,” Large said. “Which probably wouldn’t help me — to go to jail but get a sales tax exemption.”

Many of the organizational exemptions have been awarded to youth clubs and charities helping the poor, the sick and the disadvantaged.

In most cases, exempt organizations pay no state or local sales taxes on anything they buy. If they sell anything to support their missions, those transactions are tax-exempt, too.

A few organizations are partly exempt and partly not. An example is Domestic Violence Intervention Services Inc., which provides shelter and other services for abuse victims in the Tulsa area.

Associate Director Donna Mathews said the nonprofit group pays sales taxes on office supplies and other administrative expenses. But any items it buys for use in its shelters are tax-free because the tax code contains a specific exemption for that.

Organizational sales tax exemptions aren’t contributing much to the state’s current budget woes. If all of them were repealed, the savings probably wouldn’t reduce the state’s looming $1.3 billion budget hole by more than a percentage point or two, according to Tax Commission data.

“Those are things that are good causes, and they’re not money that would substantially assist in the budgetary process,” said Tax Commission spokeswoman Paula Ross, noting that the commission takes in more than $11 billion a year.

“Some of them have been around a long time,” Ross said. “They’re not something you could pluck out and raise a whole lot of money.”

David Blatt, executive director of the nonprofit, nongovernment Oklahoma Policy Institute in Tulsa, said the exemption roster is the legacy of numerous pieces of legislation approved by lawmakers and signed by governors over many decades.

“It’s hard to identify any rhyme or reason,” said Blatt, whose research group is not exempt from the sales tax.

“It’s a bit of a hodgepodge, reflecting which legislators may have been on the right committee at the right time and managed to get those through,” he said.


Exempt from Sales Taxes:

  • Biomedical research foundations
  • Boys & Girls Clubs Of America Affiliate
  • Boy Scouts Of America; Girl Scouts Of U.S.A.; Camp Fire U.S.A. Council organizations
  • Career technology student organizations
  • Charitable health organizations
  • Children’s homes on church-owned property
  • Children’s homes supported by churches
  • Church
  • City or county trust or authority
  • Community blood banks
  • Community mental health center
  • Community-based health center
  • Community-based autonomous member
  • Construction by organizations providing end-of-life care and hospice access
  • Cultural organization for disadvantaged children
  • Disabled American Veterans Dept. of Oklahoma Inc.
  • Federal government or its instrumentality
  • Federally chartered credit union
  • Health center
  • Federally recognized Indian tribes
  • Grand River Dam Authority
  • Hazardous waste treatment facility
  • Indigent health care revolving fund clinic
  • Meals On Wheels
  • Metropolitan area homeless service provider
  • Museums accredited by the American Association of Museums
  • NRA/other organizations that defend Second Amendment rights
  • National volunteer women’s service organization
  • Oklahoma coal mining
  • Older Americans Act
  • On-site universal pre- kindergarten education
  • Organizations for rehabilitation of court-adjudicated juveniles
  • Organizations for educating community regarding the developmentally disabled
  • Organizations funding scholarships in the medical field
  • Organizations providing education relating to robotics
  • Organizations supporting state parks in Oklahoma
  • Parent-teacher associations or organizations
  • Preservation of wetlands and habitat for wild ducks
  • Preservation and conservation of wild turkeys
  • Private schools-elementary/ secondary
  • Private school-higher education
  • Public school districts
  • Public schools of higher education
  • Qualified neighborhood watch organizations
  • Rural electric cooperative
  • Public nonprofit rural water district
  • School foundations
  • Shelter for abused neglected or abandoned children
  • Spaceport user
  • State of Oklahoma local or county government entity
  • Veterans of Foreign Wars of United States Oklahoma chapters
  • Volunteer fire department- Title 18
  • Youth athletic teams
  • Youth camps
  • YWCA or YMCA
  • Nonprofit corporation rural water district

 

  • Justin

    This is quality journalism. Oklahoma Watch has been on a roll lately with this kind of investigate piece, which are becoming all to rare in Oklahoma these days. Thank you for keeping the public better informed on important issues like this.

  • Jim McGoodwin

    I’m not an expert in the area, but it seems to me that someone could bring an equal protection case against the state as there is no clear distinction between which nonprofits get an exemption and which do not. The current list appears to be based on a whim by various legislators who have had interests in helping out a local nonprofit.