Marketplace facilitators face new tax and reporting obligations in Oklahoma

Sales tax is a transaction tax imposed on the transfer of a product or service from a seller to a consumer. In the U.S., 45 states have a sales tax, as do Puerto Rico and Washington, D.C. Thousands of local jurisdictions in 38 states levy a local sales tax, including Alaska, which has no statewide sales tax. 

Use tax (aka, consumer use tax) complements sales tax. In most states, if the seller doesn’t collect sales tax on a taxable sale at checkout, the buyer owes the corresponding use tax. Consumer use tax is also due when consumers buy taxable goods outside of their home state, for use or storage in the state. For example, a South Dakota resident who purchases a rug in Istanbul and has it shipped home would owe South Dakota use tax on the value of the rug. Read about the difference between sales tax and use tax for more details.

Despite efforts by state tax authorities to increase awareness of consumer use tax, many consumers either don’t know about it or don’t realize they could have consumer use tax obligations. This is one reason states wanted the right to tax remote sales: It’s simpler and more cost-effective for them to hold businesses accountable for sales tax than individuals accountable for consumer use tax. But to tax remote sales, nexus laws needed to change.

Nexus is a connection that allows a state or other taxing authority to tax a business, entity, or individual. For decades, sales tax nexus in all states was based almost entirely on physical presence: A state could require a business to register then collect and remit sales tax only if the business had a physical presence in the state, such as employees, inventory, or a brick-and-mortar store.

That changed after the Supreme Court of the United States ruled in favor of the state in South Dakota v. Wayfair, Inc. (June 21, 2018), overturning the long-standing physical presence rule. Though physical presence still establishes nexus, the Wayfair decision granted states the authority to enact economic nexus laws that base a sales tax obligation on an out-of-state seller’s economic activity in the state.

Wayfair and economic nexus paved the way for marketplace facilitator laws, which shift the obligation to collect and remit sales tax from individual sellers to the online marketplaces they sell through. 

Today, every state with a general sales tax has economic nexus and marketplace facilitator laws (click on the links for state-specific details). However, many states haven’t repealed laws that were developed prior to Wayfair to enhance remote sales or use tax collections — laws like Oklahoma’s non-collecting seller use tax notice and reporting requirements.

More than a dozen states developed non-collecting seller use tax reporting requirements in the years leading up to the Wayfair decision, when states were prohibited from taxing remote sales. Though exact requirements vary by state, non-collecting seller use tax notice and reporting laws generally require certain non-collecting remote sellers, marketplaces, or referrers to:

• Notify customers that the business doesn’t collect sales tax in the state
• Notify customers that customers are responsible for remitting and reporting use tax on taxable sales if the seller doesn’t collect sales tax at checkout
• Provide an annual purchase summary to customers to help them fulfill their use tax obligation
• Report customer information to the state tax authority

Failure to comply with a state’s non-collecting seller use tax notice and reporting requirement can lead to costly fees and penalties. 

Georgia, Kentucky, and Washington repealed their non-collecting seller use tax notice and reporting requirements after enacting economic nexus and marketplace facilitator laws. Oklahoma did not. Instead, Oklahoma added a new collection requirement for remote sellers while maintaining the notice and reporting option for marketplace facilitators, and referrers. Its policies have evolved as follows. 

From July 1, 2018, through October 31, 2019 (before economic nexus took effect):

• A remote seller, marketplace facilitator, or referrer with aggregate sales of tangible personal property of $10,000 or more during the previous 12 months is required to register for sales tax or comply with non-collecting seller use tax notice and reporting requirements

As of November 1, 2019 (after economic nexus took effect): 

• A remote seller with $100,000 or more in taxable retail sales of tangible personal property during the preceding 12 calendar months is required to register then collect and remit Oklahoma sales tax
• A marketplace facilitator or referrer with $10,000 or more in taxable retail sales of tangible personal property during the preceding 12 calendar months must register then collect and remit Oklahoma sales tax or comply with non-collecting seller use tax notice and reporting requirements

Beginning January 1, 2023:

• A remote seller with $100,000 or more in taxable retail sales of products during the preceding 12 calendar months is required to register then collect and remit Oklahoma sales tax
• A marketplace facilitator or referrer with $10,000 or more in taxable retail sales of products during the preceding 12 calendar months must register then collect and remit Oklahoma sales tax or comply with non-collecting seller use tax notice and reporting requirements

None of the small seller exceptions apply to businesses with a physical presence in Oklahoma. See the Oklahoma Tax Commission for more information.

Changing thresholds, choices, and requirements make sales and use tax compliance difficult for remote sellers, marketplace facilitators, and referrers. 

Every time any state amends its sales and use tax laws, businesses must reevaluate their obligations and adjust their compliance activities accordingly. Remote businesses selling into Oklahoma have to stay on their toes: What they did to be sales tax compliant in September 2018 may not suffice to keep them compliant when the law changes in 2023.

Automating sales tax calculation, collection, and remittance can help reduce compliance burdens. Learn more about sales tax automation.