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Fallin's grocery sales tax proposal creates confusion

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PIEDMONT, Okla. – Gov. Mary Fallin’s proposal to eliminate the sales tax on groceries brought a rash of reactions from city officials and confusion about the potential impact on municipalities.

In her State of the State speech, Fallin proposed axing the state sales tax on groceries. However, Missy Dean, director of government relations at the Oklahoma Municipal League, said that action would also eliminate the ability for cities to charge sales tax on groceries.

“The way our ordinances are written, we (cities and towns) mirror what the state does,” she said. “So, if the state does away with the sales tax on groceries, cities and towns will have to do the same.”

Fallin also proposed expanding the sales tax base on items that were previously exempt. In like manner, cities and towns could charge sales tax on those same items, Dean said.

But that’s not necessarily good news for some rural areas.

“Some small towns don’t even have those services,” she said.

The confusion grew when Fallin spokesman Mike McNutt wrote in an email that cities and towns will still be able to collect sales tax on groceries.

“While the contracts with the cities and towns calls for the tax bases to be exactly the same, exceptions can be provided by statute,” he wrote. “However, there are two exceptions. States can treat groceries and drugs different at the state level than the local level.”

Eliminating the sales tax on groceries would force some municipalities to increase utility fees or lay off employees.

Yukon City Manager Jim Crosby made it clear Yukon would go bankrupt without a grocery sales tax.

“We’re totally against it,” he said. “People don’t understand we operate primarily off sales tax. You start taking sales tax off groceries and you’re limiting what we can do. Look at how many grocery stores we have. Every city would be losing money.”

Piedmont City Manager Jason Orr said the city collected $259,912 in sales tax from Williams Grocery during the past 12 months.

Piedmont City Manager Jason Orr (Photo provided)

“Obviously, losing a quarter of a million dollars in revenue per year would force us to make significant cuts to city services,” he said. “The intent of the governor’s grocery sales tax proposal is admirable, but it’s dead on arrival in my opinion.”

Meanwhile, Okarche Town Administrator Richard Raupe said the governor’s proposal would have little impact there unless the town is able to recruit another grocery store. Okarche lost its only grocery store several years ago.

Okarche Town Administrator Richard Raupe. (Photo provided)

Okarche raised its sales tax from 3 percent to 4 ½ percent when its grocery store went out of business.

“If we were to get a grocery store sometime we might revisit our sale tax,” Raupe said.

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Tim Farley

Tim Farley is an award-winning journalist with more than 30 years of experience, including...

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