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STATE OF OKLAHOMA
1st Session of the 58th Legislature (2021)
HOUSE BILL 1714 By: Hill
AS INTRODUCED
An Act relating to revenue and taxation; amending 68
O.S. 2011, Section 1359, as last amended by Section
2, Chapter 317, O.S.L. 2016 (68 O.S. Supp. 2020,
Section 1359), which relates to certain sales tax
exemptions for manufacturing enterprises; eliminating
sales tax exemption related to consumption of
tangible personal property or construction of
manufacturing facilities; repealing 68 O.S. 2 011,
Section 1359.1, which relates to refund procedures
for certain sales tax exemption; providing an
effective date; and declaring an emergency .
BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
SECTION 1. AMENDATORY 68 O.S. 2011, Section 1359, as
last amended by Section 2, Chapter 317, O.S.L. 2016 (68 O.S. Supp.
2020, Section 1359), is amended to read as follows:
Section 1359. Exemptions - Manufacturing.
There are hereby specifically exempted from the tax levied by
Section 1350 et seq. of this title:
1. Sales of goods, wares, merchandise, tangible personal
property, machinery and equipment to a manufacturer for use in a
manufacturing operation. Goods, wares, merchandise, property,
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machinery and equipment used in a nonmanufacturing activity or
process as set forth in paragraph 14 of Section 1352 of this title
shall not be eligible for the exemption provided for in this
subsection paragraph by virtue of the activity or process being
performed in conjunction with or integrated into a manufacturing
operation.
For the purposes of this paragraph, sales made to any person,
firm or entity that has entered into a contractual relationship for
the construction and improvement of manufacturing goods, wares,
merchandise, property, machinery and equipment for use in a
manufacturing operation shall be considered sales made to a
manufacturer which is defined or classified in the North American
Industry Classification System (NAICS) Manual under Industry Group
No. 324110. Such pur chase shall be evidenced by a copy of the sales
ticket or invoice to be retained by the vendor indicating that the
purchases are made for and on behalf of such manufacturer and set
out the name of such manufacturer as well as include a copy of the
Manufacturing Exemption Permit of the manufacturer. Any person who
wrongfully or erroneously certifies that purchases are being made on
behalf of such manufacturer or who otherwise violates this paragraph
shall be guilty of a misdemeanor and upon conviction there of shall
be fined an amount equal to double the amount of sales tax involved
or incarcerated for not more than sixty (60) days or both;
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2. Ethyl alcohol when sold and used for the purpose of blending
same with motor fuel on which motor fuel tax is levied by Section
500.4 of this title;
3. Sales of containers when sold to a person regularly engaged
in the business of reselling empty or filled containers or when
purchased for the purpose of packaging raw products of farm, garden,
or orchard for resale to th e consumer or processor. This exemption
shall not apply to the sale of any containers used more than once
and which are ordinarily known as returnable containers, except
returnable soft drink bottles and the cartons, crates, pallets, and
containers used to transport returnable soft drink bottles. Each
and every transfer of title or possession of such returnable
containers in this state to any person who is not regularly engaged
in the business of selling, reselling or otherwise transferring
empty or filled containers shall be taxable under this Code.
Additionally, this exemption shall not apply to the sale of labels
or other materials delivered along with items sold but which are not
necessary or absolutely essential to the sale of the sold
merchandise;
4. Sales of or transfers of title to or possession of any
containers, after June 30, 1987, used or to be used more than once
and which are ordinarily known as returnable containers and which do
or will contain beverages defined by paragraphs 4 and 14 paragraph 5
of Section 506 1-103 of Title 37 37A of the Oklahoma Statutes, or
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water for human consumption and the cartons, crates, pallets, and
containers used to transport such returnable containers;
5. Sale of tangible personal property when sold by the
manufacturer to a person who transports it to a state other than
Oklahoma for immediate and exclusive use in a state other than
Oklahoma. Provided, no sales at a retail outlet shall qualify for
the exemption under this paragraph;
6. Machinery, equipment, fue ls and chemicals or other materials
incorporated into and directly used or consumed in the process of
treatment to substantially reduce the volume or harmful properties
of hazardous waste at treatment facilities specifically permitted
pursuant to the Oklah oma Hazardous Waste Management Act and operated
at the place of waste generation, or facilities approved by the
Department of Environmental Quality for the cleanup of a site of
contamination. The term "hazardous" waste" may include low-level
radioactive waste for the purpose of this paragraph;
7. Except as otherwise provided by subsection I of Section 3658
of this title pursuant to which the exemption authorized by this
paragraph may not be claimed, sales of tangible personal property to
a qualified manufacturer or distributor to be consumed or
incorporated in a new manufacturing or distribution facility or to
expand an existing manufacturing or distribution facility. For
purposes of this paragraph, sales made to a contractor or
subcontractor that has pre viously entered into a contractual
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relationship with a qualified manufacturer or distributor for
construction or expansion of a manufacturing or distribution
facility shall be considered sales made to a qualified manufacturer
or distributor. For the purpo ses of this paragraph, "qualified
manufacturer or distributor " means:
a. any manufacturing enterprise whose total cost of
construction of a new or expanded facility exceeds the
sum of Five Million Dollars ($5,000,000.00) and in
which at least one hundred ( 100) new full-time-
equivalent employees, as certified by the Oklahoma
Employment Security Commission, are added and
maintained for a period of at least thirty -six (36)
months as a direct result of the new or expanded
facility,
b. any manufacturing enterpri se whose total cost of
construction of a new or expanded facility exceeds the
sum of Ten Million Dollars ($10,000,000.00) and the
combined cost of construction material, machinery,
equipment and other tangible personal property exempt
from sales tax under the provisions of this paragraph
exceeds the sum of Fifty Million Dollars
($50,000,000.00) and in which at least seventy -five
(75) new full-time-equivalent employees, as certified
by the Oklahoma Employment Security Commission, are
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added and maintained for a period of at least thirty -
six (36) months as a direct result of the new or
expanded facility,
c. any manufacturing enterprise whose total cost of
construction of an expanded facility exceeds the sum
of Three Hundred Million Dollars ($300,000,000.00) and
in which the manufacturer has and maintains an average
employment level of at least one thousand seven
hundred fifty (1,750) full -time-equivalent employees,
as certified by the Employment Security Commission, or
d. any enterprise primarily engaged in the general
wholesale distribution of groceries defined or
classified in the North American Industry
Classification System (NAICS) Manual under Industry
Groups No. 4244 and 4245 and which has at least
seventy-five percent (75%) of its total sales to in -
state customers or buyers and whose total cost of
construction of a new or expanded facility exceeds the
sum of Forty Million Dollars ($40,000,000.00) with
such construction commencing on or after July 1, 2005,
and before December 31, 2005, and which at least fif ty
new full-time-equivalent employees, as certified by
the Oklahoma Employment Security Commission, are added
and maintained for a period of at least thirty -six
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(36) months as a direct result of the new or expanded
facility.
For purposes of this paragraph, the total cost of construction
shall include building and construction material and engineering and
architectural fees or charges directly associated with the
construction of a new or expanded facility. The total cost of
construction shall not include at torney fees. For purposes of
subparagraph c of this paragraph, the total cost of construction
shall also include the cost of qualified depreciable property as
defined in Section 2357.4 of this title and labor services performed
in the construction of an e xpanded facility. For the purpose of
subparagraph d of this paragraph, the total cost of construction
shall also include the cost of all parking, security and dock
structures or facilities necessary to manage, process or secure
vehicles used to receive an d/or distribute groceries through such a
facility. The employment requirement of this paragraph can be
satisfied by the employment of a portion of the required number of
new full-time-equivalent employees at a manufacturing or
distribution facility that i s related to or supported by the new or
expanded manufacturing or distribution facility as long as both
facilities are owned by one person or business entity. For purposes
of this section, "manufacturing facility " shall mean building and
land improvements used in manufacturing as defined in Section 1352
of this title and shall also mean building and land improvements
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used for the purpose of packing, repackaging, labeling or assembling
for distribution to market, products at least seventy percent (70%)
of which are made in Oklahoma by the same company but at an off -
site, in-state manufacturing or distribution facility or facilities.
It shall not include a retail outlet unless the retail outlet is
operated in conjunction with and on the same site or premises as the
manufacturing facility. Up to ten percent (10%) of the square feet
of a manufacturing or distribution facility building may be devoted
to office space used to provide clerical support for the
manufacturing operation. Such ten percent (10%) may be in a
separate building as long as it is part of the same contiguous tract
of property on which the manufacturing or distribution facility is
located. Only sales of tangible personal property made after June
1, 1988, shall be eligible for the exemption pr ovided by this
paragraph. The exemption authorized pursuant to subparagraph d of
this paragraph shall only become effective when the governing body
of the municipality in which the enterprise is located approves a
resolution expressing the municipality 's support for the
construction for such new or expanded facility. Upon approval by
the municipality, the municipality shall forward a copy of such
resolution to the Oklahoma Tax Commission;
8. Sales of tangible personal property purchased and used by a
licensed radio or television station in broadcasting. This
exemption shall not apply unless such machinery and equipment is
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used directly in the manufacturing process, is necessary for the
proper production of a broadcast signal or is such that the failure
of the machinery or equipment to operate would cause broadcasting to
cease. This exemption begins with the equipment used in producing
live programming or the electronic equipment directly behind the
satellite receiving dish or antenna, and ends with the t ransmission
of the broadcast signal from the broadcast antenna system. For
purposes of this paragraph, "proper production" shall include, but
not be limited to, machinery or equipment required by Federal
Communications Commission rules and regulations;
9. 8. Sales of tangible personal property purchased or used by
a licensed cable television operator in cablecasting. This
exemption shall not apply unless such machinery and equipment is
used directly in the manufacturing process, is necessary for the
proper production of a cablecast signal or is such that the failure
of the machinery or equipment to operate would cause cablecasting to
cease. This exemption begins with the equipment used in producing
local programming or the electronic equipment behind the satellite
receiving dish, microwave tower or antenna, and ends with the
transmission of the signal from the cablecast head -end system. For
purposes of this paragraph, "proper production" shall include, but
not be limited to, machinery or equipment requir ed by Federal
Communications Commission rules and regulations;
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10. 9. Sales of packaging materials for use in packing,
shipping or delivering tangible personal property for sale when sold
to a producer of agricultural products. This exemption shall not
apply to the sale of any packaging material which is ordinarily
known as a returnable container;
11. 10. Sales of any pattern used in the process of
manufacturing iron, steel or other metal castings. The exemption
provided by this paragraph shall be appli cable irrespective of
ownership of the pattern provided that such pattern is used in the
commercial production of metal castings;
12. 11. Deposits or other charges made and which are
subsequently refunded for returnable cartons, crates, pallets, and
containers used to transport cement and cement products;
13. 12. Beginning January 1, 1998, machinery, electricity,
fuels, explosives and materials, excluding chemicals, used in the
mining of coal in this state;
14. 13. Deposits, rent or other charges made fo r returnable
cartons, crates, pallets, and containers used to transport mushrooms
or mushroom products from a farm for resale to the consumer or
processor;
15. 14. Sales of tangible personal property and services used
or consumed in all phases of the extr action and manufacturing of
crushed stone and sand, including but not limited to site
preparation, dredging, overburden removal, explosive placement and
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detonation, on-site material hauling and/or transfer, material
washing, screening and/or crushing, prod uct weighing and site
reclamation; and
16. 15. Sale, use or consumption of paper stock and other raw
materials which are manufactured into commercial printed material in
this state primarily for use and delivery outside this state. For
the purposes of this section, "commercial printed material " shall
include magazines, catalogs, retail inserts and direct mail.
SECTION 2. REPEALER 68 O.S. 2011, Section 1359.1, is
hereby repealed.
SECTION 3. This act shall become effective July 1, 2021.
SECTION 4. It being immediately necessary for the preservation
of the public peace, health or safety, an emergency is hereby
declared to exist, by reason whereof this act shall take effect and
be in full force from and after its passage and approval.
58-1-5159 AQH 12/01/20