Sales Subject to Sales Tax - Documentation

Overview

Uses

Methodology

Data Limitations

Contacts

Overview

The Center for Economic and Management Research, Price College of Business, The University of Oklahoma uses city sales tax data to estimate local sales of goods and services, (sales subject to sales tax) for Oklahoma counties and selected cities. The Sales Subject to Sales Tax Series (SST) provides a useful and timely means of analyzing fundamental trends in the regional economies in Oklahoma.

Uses

The information contained in this report can be used in a variety of ways. The historical information provides a picture of local economic performance. Analysts can use it to examine city or county economic performance over time. It can also be used to compare one city or county to another or to overall state sales activities. This information is particularly valuable because of its timely nature. Because there is only a two-month lag between the time city sales taxes are collected and the time they are reported, the sales-subject-to-sales-tax indicators offer a snapshot of economic conditions with a minimal lag in time.

Methodology

Sales Subject to Sales Tax estimates are  based on city sales tax data provided by the Business Tax Division of the Oklahoma Tax Commission. Estimates are released for each of Oklahoma's Counties and the 50 largest cities by month. The series begins in January 1980.

The amount of sales is estimated by dividing sales tax collections by the city's sales tax rate. For example, suppose a city raised $10,000 in sales tax collections in a particular month. If the city's sales tax rate was 2.0 percent, then the dollar value of the sales subject to city sales tax would have equaled $500,000 during that month. It is important to note that sales that are not subject to sales tax are not included in these totals. Also, auto sales, which are not subject to the sales tax, are not included. Gasoline and motor fuels are also not included.

Data Limitations

Several issues should be considered when using the information presented in this report.

1)  Since the city sales tax is applied to certain purchases by businesses, the sales subject to sales tax estimates include some non-retail sales, that is, some wholesale transactions.

2)  The sales subject to sales tax values for a particular city reflect what is occurring in that city only if they are used to estimate total sales in a larger geographic area, the estimate will be understated. Again, there are two reasons for this. One is that not all cities collect a sales tax, and the second is that many sales are made outside a city's jurisdiction. Both factors will lead to underestimating local area sales.

3)  Caution should be exercised in interpreting changes in the series for any particular area.  A change in the series simply means that the level of sales has changed. It does not necessarily imply changes in other economic indicators. For example, sales may decline even though individuals in a city may be earning as much as they were previously. They may just be growing more cautious in their expenditures. However, this is the kind of situation that bears watching because, in general, sales tend to fluctuate less than personal income.

4)  It should also be noted that changes in the series can reflect changes in regional spending patterns rather than a general deterioration in economic conditions. For example, a new highway which makes it easier to shop in a larger city may reduce local purchases even though income in the region remains the same.

Despite these qualifiers, the information presented in this database should be useful to a variety of people interested in economic performance. The data are timely, and, when used in conjunction with other economic indicators, they provide an informative picture of local economic conditions.

Contacts

For additional information about the Oklahoma Sales Subject to Sales Tax Series contact:

Robert Dauffenbach, Director
Center for Economic and Management Research
Michael F. price College of Business
The University of Oklahoma
307 W. Brooks
Norman, Oklahoma
405-325-2934
mailto:rdauffen@ou.edu

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