United States

Oklahoma: Department Addresses Sales Tax Treatment of Reusable Bag Credit

Oct 12, 2015
From KPMG TaxWatch

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Recently, the Oklahoma Tax Commission clarified the sales tax treatment of a reusable bag tax credit offered by a grocery store. Customers providing their own grocery bags were allowed a per bag credit, which was either applied to the customer’s grocery bill or donated to a food bank. The issue before the Commission was whether sales and use tax applied to the total amount of the bill before the credit, or whether the sales tax base excluded the credited amounts.  Under Oklahoma law, sales tax is calculated on a taxpayer’s gross receipts. However, gross receipts do not include discounts, including cash, term, or coupons that are not reimbursed by a third party, that are allowed by a seller and taken by a purchaser on a sale. Because the reusable bag credit qualified as a discount, the Commission determined that the credit should not be included in gross receipts for purposes of calculating sales tax, whether applied to a customer’s grocery bill or given as a donation to a food bank.  Please contact Brian Culvey at 713-319-3831 with questions on this Oklahoma ruling.

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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.