New obligations for Oklahoma’s remote sellers
- Sales and Use Tax
- Oct 31, 2016 | Gail Cole
Under Oklahoma’s new Retail Protection Act, an out-of-state business selling taxable goods or services to consumers in Oklahoma may have to either voluntarily register with the state and collect Oklahoma use tax or notify Oklahoma customers of their obligation to remit use tax on their purchases as of November 1, 2016.
Like many other states, Oklahoma would like to capture more tax revenue from remote sales (it loses approximately $150 million in tax revenue annually to untaxed internet sales). The new policy attempts to boost revenue in two ways: by incentivizing out-of-state sellers to collect seller use tax, and by encouraging consumers to remit consumer use tax on untaxed sales.
The Retail Protection Act (H.B. 2531) expands the definition of “maintaining a place of business in this state” to include the following (amendments to existing law italicized):
- Utilizing or maintaining in the state, directly or by subsidiary, an office, distribution house, sales house, warehouse, or other physical place of business, whether owned or operated by the vendor or any other person, other than a common carrier acting in its capacity as such
- The presence of any person, other than a common carrier …, that has substantial nexus in this state and that:
- Sells a similar line of products as the vendor under the same or a similar name
- Uses trademarks, service marks, or trade names in Oklahoma that are similar or the same as the vendor’s
- Delivers, installs, assembles or performs maintenance services for the vendor
- Facilitates the vendor’s delivery of property to customers by allowing the vendor’s customers to pick up property sold by the vendor at an office, distribution facility, warehouse, storage place or other place maintained by the person in Oklahoma
- Conducts any other activities in Oklahoma that are significantly associated with the vendor’s ability to establish and maintain a market in Oklahoma for the vendor’s sale
Under the Act, out-of-state sellers meeting any of the above conditions are required to register with the state and collect and remit seller use tax starting November 1. Vendors are entitled to rebut the presumption.
There is an incentive to complying with the new policy. The Tax Commission won’t seek payment of uncollected use taxes from out-of-state retailers who register to collect and remit applicable sales/use taxes on sales made prior to such registration, “provided the retailer was not registered in this state in the twelve month period preceding the effective date.” In addition, the Tax Commission will not charge interest or penalties on uncollected sales/use taxes on sales made during the period the retailer wasn’t registered in the state if registration occurs prior to May 1, 2017.
Remote vendors not required under H.B. 2531 to register with the state must send a statement to their Oklahoma customers by the first of February each year, “notifying them of the amount of their total purchases made during the preceding calendar year.” Unlike a similar requirement in Colorado, the Oklahoma policy does not also require vendors to provide the Oklahoma Tax Commission with a list of customers owing use tax.
Finally, the Retail Protection Act makes it difficult for deals removing the new tax requirements to be struck between government officials and out-of-state businesses. It “declares as null and void, unless approved by a majority vote of each house of the Oklahoma legislature, any agreement between a person and this state’s executive branch, or any other state agency/department ruling that the person is not maintaining a place of business in this state or is not required to collect sales and use tax despite the presence of a warehouse, distribution center, or fulfillment center in this state owned or operated by the vendor.”
Companies doing business in Oklahoma may have a new collection or reporting obligation under the Retail Protection Act. Sales and use tax compliance in any state can be facilitated with tax automation software. Learn more.