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ENGROSSED HOUSE
BILL NO. 1600 By: Martinez of the House
and
Montgomery of the Senate
[ digital asset mining - sales tax exemption -
effective date ]
BE IT ENACTED BY THE P EOPLE OF THE STATE OF OKLAHOMA:
SECTION 1. AMENDATORY 68 O.S. 2021, Section 1359, is
amended to read as follows :
Section 1359. There are hereby specifically ex empted from the
tax levied by Section 1350 et seq. of this title:
1. Sales of goods, wa res, merchandise, tangible persona l
property, machinery and equipment to a manufacturer for use in a
manufacturing operation. Goods, wares, merchandise, property,
machinery and equipment used in a nonmanufacturing activity or
process as set forth in parag raph 14 of Section 1352 of this ti tle
shall not be eligible for the exemption provided for in this
subsection by virtue of the activity or process being performed in
conjunction with or integra ted into a manufacturing operation.
For the purposes of this pa ragraph, sales made to any person,
firm or entity that has entered into a contractual relationship for
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the construction and improvement of manufacturing goods, wares,
merchandise, property, mac hinery 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 purchase sh all 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 cop y of the
Manufacturing Exemption Permit of the manufacturer. Any person who
wrongfully or erroneously certifies that purc hases are being made on
behalf of such manufacturer or who otherwise violates this paragraph
shall be guilty of a misdemeanor and upon conviction thereof shall
be fined an amount equal to double the amount of sales tax inv olved
or incarcerated for not more than sixty (60) days or both;
2. Ethyl alcohol when sold and used for the purpose of blending
same with motor fuel on which motor fu el tax is levied by Secti on
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 the consum er or processor. This exemption
shall not apply to the sale of any containers used more than onc e
and which are ordinarily known as returnable containers, except
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returnable soft drink bottles and the cartons, crates, pallets, and
containers used to transp ort returnable soft drink bottles. Each
and every transfer of title or possession of such return able
containers in this state to any person who is not regularly engaged
in the business of selling, reselling or otherwise transferri ng
empty or filled contai ners shall be taxable under this Code.
Additionally, this exem ption 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 so ld
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 of Section
506 of Title 37 of the Oklahoma Statutes, or water for human
consumption and the cartons, crates, p allets, and containers used to
transport such returnable containers;
5. Sale of tangible personal property when sold by the
manufacturer to a person who trans ports it to a state other than
Oklahoma for immediate and exclu sive 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, fuels an d chemicals or other mate rials
incorporated into and directly used or consumed in the pr ocess of
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treatment to substantiall y reduce the volume or harmful properties
of hazardous waste at treatment facilities specifically permitted
pursuant to the Oklahoma H azardous Waste Management Act and operated
at the place of waste generation, or faciliti es 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 pa ragraph;
7. Except as otherwise provided by subsection I of Se ction 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 manufacture r or distributor to be co nsumed or
incorporated in a new manufacturing or distribution f acility or to
expand an existing m anufacturing or distribution facility. For
purposes of this paragraph, sales made to a contractor or
subcontractor that has previousl y entered into a contract ual
relationship with a qualified manufacturer or distributor f or
construction or expansion of a manufacturing or distribution
facility shall be considered sales made to a qualified manufacturer
or distributor. For the purposes of this paragraph, "qualified
manufacturer or distributor " means:
a. any manufacturing ent erprise 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) n ew full-time-
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equivalent employees, as certified by the Oklahoma
Employment Security Comm ission, 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 enterprise who se total cost of
construction of a new or expanded facility exceeds the
sum of Ten Million Dollars ($10,000,000.00) and th e
combined cost of construction material, machinery,
equipment and other tangible personal property exempt
from sales tax under the pr ovisions of this paragrap h
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
added and maintained for a per iod 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 thous and seven
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hundred fifty (1,750) fu ll-time-equivalent employees,
as certified by the Employment Security Commission, or
d. any enterprise primarily engaged in the genera l
wholesale distribution of groceries defined or
classified in the North American Indust ry
Classification System (NAICS) M anual 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 to tal 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 fifty
new full-time-equivalent employees, as certified by
the Oklahoma Employment Security Commis sion, are added
and maintained for a period of at least thirty-six
(36) months as a direct result of the new or expanded
facility.
For purposes of this paragraph, the t otal cost of construction
shall include building and construction material and engineeri ng and
architectural fees or charg es directly associated with the
construction of a new or expanded facility. The total cost of
construction shall not include attorney fees. For purposes of
subparagraph c of this paragraph, the total cost of construction
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shall also include the cost of qu alified depreciable property as
defined in Section 2357.4 of this title and labor services performed
in the construction of an expande d facility. For the purp ose of
subparagraph d of this paragraph, the total cost of cons truction
shall also include the co st of all parking, security and dock
structures or facilities necessary to manage, process or secure
vehicles used to receive and/or d istribute groceries throu gh such a
facility. The employment requirement of this paragra ph can be
satisfied by the employm ent of a portion of the required number of
new full-time-equivalent employees at a manufacturing or
distribution facility that is rela ted to or supported by th e new or
expanded manufacturing or distribution facility as lon g 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 defin ed in Section 1352
of this title and shall also mean building a nd land improvements
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 th e same company but at an off-
site, in-state manufacturing or di stribution 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 th e
manufacturing facility. Up to ten percent (10%) of the square feet
of a manufacturing or distribution facility building may be devoted
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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 distributio n facility is
located. Only sales of tangible personal property made after June
1, 1988, shall be eligible for the exemption provided by this
paragraph. The exemption authorized pursuant to subparagraph d of
this paragraph shall only become effective whe n 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 forwa rd 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 stati on in broadcasting. 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 broadcast signal or is such that the failure
of the machinery or equipment to operate would cause broadcasting to
cease. This exemption beg ins with the equipment used in pro ducing
live programming or the electronic equipment directly behind the
satellite receiving dish or antenna, and ends with the transmi ssion
of the broadcast signal from the broadcast antenna system. For
purposes of this paragraph, "proper production" shall include, but
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not be limited to, machinery or equipment required by Federal
Communications Commission rules and regulations;
9. Sales of tangible personal pr operty purchased or used by a
licensed cable television operato r in cablecasting. This exemption
shall not apply unless such machinery and equipment is used directly
in the manufacturing process, is necessary for the proper produc tion
of a cablecast signa l or is such that the failure of the machinery
or equipment to operate would cause cablecasting t o cease. This
exemption begins with the equipment used in producing local
programming or the electronic equipment behind the satellit e
receiving dish, microwa ve tower or antenna, and ends with the
transmission of the sign al from the cablecast head -end system. For
purposes of this paragraph, "proper production" shall include, but
not be limited to, machinery or equipment required by Fed eral
Communications Commi ssion rules and regulations;
10. 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 mat erial which is ordinarily known as a
returnable container;
11. Sales of any pattern used in the process of manufacturing
iron, steel or other metal castings. The exemption provided by this
paragraph shall be applicable irrespecti ve of ownership of the
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pattern provided that such pattern is used in the commercial
production of metal castings;
12. Deposits or other charges made and which are subsequently
refunded for returnable cartons, crates, pallets, and containers
used to transport cement and cement pro ducts;
13. Beginning January 1, 1998, machinery, electricity, fuels,
explosives and materials, e xcluding chemicals, used in the mining of
coal in this state;
14. Deposits, rent or other charges made for returnable
cartons, crates, pallets, and containers used to transport mushrooms
or mushroom products from a farm f or resale to the consumer or
processor;
15. Sales of tangible personal property and services used or
consumed in all phases of the extraction and manufacturing of
crushed stone and sand, inclu ding but not limited to site
preparation, dredging, overburden removal, explosive placement and
detonation, onsite material hauling and/or transfer, material
washing, screening and/or crushing, product weighing and site
reclamation; and
16. Sale, use or consumption of paper stock and other raw
materials which are man ufactured into commercial printed material in
this state primarily for use and delivery outside this state. For
the purposes of this section, "commercial printed mater ial" shall
include magazines, catalogs, retail inserts and direct mail.
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17. Beginning on the effective date of this act a nd ending on
December 31, 2038, sales of machinery and equipment, including but
not limited to, servers and computers, racks, power di stribution
units, cabling, switchgear, transformers, substations, software, and
network equipment, and electricity used fo r commercial mining of
digital assets purposes in a colocation facility.
For purposes of this paragraph:
a. "blockchain technology " means shared or distributed
data structures or digital ledgers governed by
consensus protocols and maintained by peer -to-peer
networks that:
(1) Store digital transactions , and
(2) Verify and secure transactions cryptographically ,
b. "colocation facility" means a facility or facilit ies,
totaling not less than fifty-thousand (50,000) square
feet, located in this state and utiliz ed in the
commercial mining of digital assets or in hosting
persons engaged in the commercial mining of digital
assets through utiliza tion of the facility 's
infrastructure, including se rvers and network hardware
powered by Internet bandwidth, electricity, and other
services generally required for such mining
operations. Provided, no facility shall qualify as a
"colocation facility" unless the facility has entered
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into a load reduction agreement with its retail
electric supplier,
c. "commercial mining of digital assets" means the
process through which blockchain technology is used to
mine digital assets at a colocation facility ,
d. "digital assets" means a type of virtual currency that
utilizes blockchain technology and that :
(1) can be digitally traded betw een users, or
(2) can be converted or exchanged for legal tender ,
and
e. "load reduction agreement " means an agreement wherein
the customer grants the retail e lectric supplier the
right, upon demand, to temporarily reduce or curtail
the customer's use of electric power in order to
respond to inclement weather or other adverse
conditions,
f. "mine" or "mining" means the process through wh ich
blockchain transactio ns are verified and accepted by
adding the transactions to a bl ockchain ledger, which
involves solving complex and mathematical
cryptographic problems associated with a block
containing transaction data .
SECTION 2. This act shall become e ffective November 1, 2023.
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Passed the House of Representatives the 6th day of March, 2023.
Presiding Officer of the House
of Representatives
Passed the Senate the ___ day of __________, 2023.
Presiding Officer of the Senate