Oklahoma to tax marketplace sales, impose use tax reporting requirements on non-collecting sellers
- April 9, 2018 | Gail Cole
Update 6.26.2018: The Supreme Court of the United States has concluded the physical presence rule of Quill is unsound and incorrect.
Update 4.11.2018: Governor Fallin has signed HB 1019, which requires third-party online retailers to collect and remit sales tax. According to the governor’s press release, the measure is expected to generate more than $20 million for public schools and “will affect purchases made through sites like Amazon, when the seller is someone other than Amazon.”
A remote seller, marketplace facilitator, or referrer with aggregate sales of at least $10,000 in Oklahoma must file an election with the Tax Commission to collect and remit sales and use tax, or comply with the notice and reporting requirements detailed below. The election must be made on or before July 1, 2018, for the 2018–2019 fiscal year, and on or before June 1 of each subsequent calendar year, starting June 1, 2019. Affected sellers must collect tax or comply with the notice requirement starting July 1, 2018.
The Oklahoma Legislature has come up with a way to increase teacher salaries: Tax more sales by out-of-state sellers. It’s been approved by both the House and Senate and now needs only Governor Mary Fallin’s signature to become law.
House Bill 1019 offers non-collecting sellers that do a certain amount of business in the state a choice: Collect and remit Oklahoma sales tax, or comply with use tax notice and reporting requirements. If enacted, it would apply to remote sellers, marketplace facilitators, and referrers with at least $10,000 in aggregate sales of tangible personal property in (or delivered to locations in) Oklahoma during the immediately preceding twelve-calendar-month period.
The new requirements pertain to remote transactions only. Marketplace facilitators, referrers, or remote sellers with a place of business in Oklahoma must collect tax on their own sales.
New notice and reporting requirements for marketplace facilitators and remote sellers
Remote marketplace facilitators and remote sellers that meet the sales threshold and opt not to collect and remit sales tax must post a conspicuous notice on their forums, informing potential Oklahoma purchasers that:
- Sales or use tax may be due in connection with the purchase and delivery of tangible personal property in Oklahoma
- Oklahoma requires the purchaser to file a return if use tax is due in connection with the purchase and delivery
- The notice is required by law
In addition, each purchaser must be sent a written notice at the time of sale that includes the following:
- A statement that sales or use tax is not being collected in connection with the purchase
- A statement that the purchaser may be required to remit use tax directly to the Oklahoma Tax Commission
- Instructions for obtaining additional information from the Commission regarding whether and how to remit use tax
Remote marketplace facilitators and sellers are also prohibited from stating that sales or use tax is not imposed on the transaction unless the transaction is exempt from sales and use tax by Oklahoma law.
Similar notice requirements apply to referrers. However, referrers must also explain that if the person to whom the purchaser is being referred does not collect sales or use tax on a subsequent purchase by the purchaser, “the person may be required to provide information to the purchaser and the Commission about the purchaser’s potential use tax liability.”
Annual customer reports
Non-collecting remote sellers and marketplace facilitators must provide, no later than January 31 of each year, a written report to each Oklahoma purchaser that includes the following:
- A written statement that they did not collect sales or use tax in connection with the purchaser’s transactions and that the purchaser may be required to remit use tax to the Tax Commission
- A list, by date, indicating the type and purchase price of each product purchased or leased by the purchaser from the remote seller or marketplace facilitator and delivered to a location in Oklahoma
- Instructions for obtaining additional information from the Commission regarding whether and how to remit use tax to the Commission
- A statement that the remote seller or marketplace facilitator is required to submit a report to the Commission that includes the name of the purchaser and the aggregate dollar amount of the purchaser’s purchases from the remote seller or marketplace facilitator
- Such additional information as the Commission may reasonably require
Annual state reports
In addition, non-collecting remote sellers and marketplace facilitators must submit, no later than January 31 of each year, a written report to the Oklahoma Tax Commission.
The report must include the following information about each purchaser who was sent the above reports:
- The purchaser’s name
- The purchaser’s billing address, last-known mailing address (if different), and Oklahoma delivery address
- The aggregate dollar amount of the purchaser’s purchases from the remote seller or marketplace facilitator
- The name and address of the remote seller, marketplace facilitator, or marketplace seller that made the sales to the purchaser
New notice and reporting requirements for non-collecting referrers
Non-collecting referrers must provide each remote seller to whom the referrer transferred a potential purchaser located in Oklahoma during the immediately preceding calendar year:
- A statement that sales or use tax may be imposed by the state on the transaction
- A statement that the remote seller may be required to either collect and remit tax or comply with notice and reporting requirements
- Instructions for obtaining additional information regarding sales and use tax from the Commission
In addition, by January 31 of each year, non-collecting referrers must send the Tax Commission a list of persons who received the above notice.
Penalties for failure to comply
Non-collecting marketplace facilitators, remote sellers, and referrers that fail to comply with the notice and reporting requirements will be assessed a penalty of $20,000 or 20 percent of total sales in Oklahoma during the previous 12 months, whichever is less. The penalty will be assessed separately for each violation, but may only be assessed once in a calendar year.
The normal penalties and interest apply to remote sellers, marketplace providers, and referrers that opt to collect and remit tax in Oklahoma, and fail to do so as required. However, the Tax Commission may abate or reduce any such penalties or interest due to hardship, or for a good cause.
Marketplace facilitators and referrers won’t be penalized if they can show that failure to collect the correct amount of tax was due to incorrect information given to them by a marketplace seller or remote seller.
Protection from class action
The measure makes it illegal to bring a class action against a marketplace facilitator or referrer on behalf of purchasers arising from or in any way related to an overpayment of sales or use tax collected by the marketplace facilitator or referrer.
The measure has a great deal of support in the Legislature, passing 92-7 in the House. No doubt that’s in part due to the fact that it could generate more than $20 million for education, which the state sorely needs.
A similar law took effect in Rhode Island in August 2017 and Washington state on January 1, 2018. They’ve been effective. Amazon and Etsy are among the sellers now collecting tax on their third-party sales in Washington, and Amazon has shared third-party seller information with Rhode Island.