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Amazon to collect Oklahoma sales tax, March 2017

  • Feb 3, 2017 | Gail Cole

 Oklahoma is the latest state to announce that Amazon will voluntarily collect and remit its sales and use tax.

Amazon.com will voluntarily collect and remit Oklahoma sales and use tax beginning March 1, 2017. Governor Mary Fallin (R) said yesterday that this will bring relief not only to the state, which is currently facing an $870 million budget deficit, but also the cities, towns, and counties that rely on sales tax revenue. Exactly how much revenue Oklahoma stands to gain by taxing Amazon sales is, as yet, unclear.

Since the start of the year, the internet retail behemoth has either started collecting tax or announced it will collect tax in 10 states, and Oklahoma makes 11. The company started collecting in Iowa, Louisiana, Nebraska, and Utah on January 1, and in Mississippi, Missouri, Rhode Island, South Dakota, and Vermont on February 1. It was announced in January that Amazon will tax Wyoming transactions as of March 1.

Amazon is only required to collect tax in states where it has nexus — a substantial connection which precedent maintains is a substantial physical presence such as a retail store, warehouse, or employees. This precedent has been upheld by the Supreme Court of the United States, most notably in its 1992 decision, Quill Corp. v. North Dakota.

However, since the internet has changed the face of retail and dramatically reduced state and local sales tax collections, a growing number of states are broadening their definition of nexus. They’re enacting policies that base nexus on affiliate relationships that generate a certain amount of business (affiliate nexus), referrals from links on in-state websites (click-through nexus), and even general economic benefit arising from sales made in the state (economic nexus).

Since these policies challenge the precedent upheld by Quill, they are difficult to enforce. Some have sparked ongoing legal battles that many states hope will lead to an overturning of Quill. Some retailers ignore these policies; others voluntarily comply with them. As recently as last year, Amazon severed relationships in a state with broadened nexus laws to ensure it would not have to collect and remit (see Amazon Puts Louisiana Associates in Check).

Under Oklahoma’s Retail Protection Act, effective November 1, 2016, a remote vendor is considered to have nexus in the state if any person (other than a common carrier) with substantial nexus conducts any activities in Oklahoma that are significantly associated with the vendor’s ability to establish and maintain a market in Oklahoma. As the Act also defines “marketplace provider” and “marketplace seller,” Amazon presumably has nexus with Oklahoma.

Yet the company did not sever its ties to Oklahoma affiliates in November, and it reopened its Associates Program to Louisiana residents on January 1, 2017, the day it started collecting Louisiana tax. In fact, it’s in step with Amazon’s actions in recent months to do exactly what it just did: voluntarily agree to collect and remit Oklahoma tax.

Five states in this country don’t have a general sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. With the recent news of Oklahoma, only five states remain where Amazon does not or will not soon collect and remit tax: Arkansas, Hawaii, Idaho, Maine, and New Mexico. Of those, Arkansas, Hawaii, and New Mexico are currently considering legislation that would broaden nexus.

So where will Amazon collect next? Cast your vote in the comments below.

The more states go after remote sales tax revenue, the more challenging sales and use tax compliance will become for retailers. Tax automation software simplifies sales and use tax compliance for businesses of all sizes, in all states. Learn more.

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.