Oklahoma Imposes Hotel, Tobacco, and Motor Fuel Taxes

Enacted Oklahoma legislation makes changes affecting the taxation of cigarettes and little cigars, fuel, oil and gas production, and hotel stays.

Cigarette & Tobacco Taxes

The bill imposes an additional excise tax of 50 mills/cigarette ($1.00/20-pack). It also taxes little cigars in the same way and at the same rate that cigarettes are taxed. Finally, the bill removes certain tobacco products tax levies on little cigars.

Motor Fuel Excise Tax

An additional motor fuel excise tax of $0.03/gallon for gasoline and $0.06/gallon for diesel fuel applies to in-state use or consumption.

Gross Production Tax

The gross production tax rate for oil and gas is increased by 3% (from 2% to 5%). Specifically, production from wells spudded before or after the legislation’s effect will be taxed at 5% from the first month for 36 months. After that, production is taxed at:

  • 7% of the gross value of oil production based on a per-barrel measurement of 42 U.S. gallons of 231 cubic inches per/gallon, computed at a temperature of 60 degrees Fahrenheit; and
  • 7% of the gross value of gas production.

However, if State Question No. 795 is approved by voters, the bill will reduce the gross production tax rate to 2% instead of increasing it to 5% as described above. The 2% rate would apply for 36 months of production. After that, a 7% rate would apply.

State Question No. 795 asks whether to levy an additional 5% gross production tax on oil and gas wells during the first 36 months of production.

Repeal of Production Tax Exemptions

Finally, the bill removes provisions governing exemptions for:

  • incremental production resulting from an enhanced recovery project;
  • production from a horizontally drilled well;
  • severance or production from an inactive well;
  • production from deep spudded wells;
  • production from new discovery wells; and
  • oil and gas from certain wells utilizing three-dimensional seismic technology.

Hotel Occupancy Tax

The bill creates the Oklahoma Occupancy Tax Act which imposes a new $5.00/night hotel occupancy tax on daily hotel room rentals. the tax does not apply to rentals of more than 30 days. The act requires innkeepers to:

  • collect the tax when the customer pays for the room;
  • remit the tax to the OTC in the same way and at the same time as the sales tax; and
  • separately state the tax on the bill.

The hotel occupancy tax does not apply to the federal government or its agencies or instrumentalities.

H.B. 1010, Laws 2018, Second Extraordinary Session, effective 90 days after adjournment; Initiative Petition No. 416, State Question No. 795, filed with the Oklahoma Secretary of State December 20, 2017

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