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Oklahoma enacts legislation imposing collection and reporting requirements on marketplace sales

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On April 10, 2018, Oklahoma Gov. Mary Fallin signed legislation that will require certain remote sellers, marketplace facilitators and referrers to elect to collect and remit sales and use tax, or alternatively elect to comply with new notice and reporting requirements.1 The first election must be filed with the Oklahoma Tax Commission by July 1, 2018. If remote sellers, marketplace facilitators or referrers fail to make an election, they will be subject to the notice and reporting requirements.

Election to collect tax or comply with notice and reporting requirements By July 1, 2018, remote sellers,2 marketplace facilitators3 or referrers4 that had aggregate sales of tangible personal property within Oklahoma or delivered to locations within Oklahoma subject to sales or use tax worth at least $10,000 during the prior 12-month period must file an election with the Commission. The affirmative election allows remote sellers, market facilitators or referrers the choice to either: (i) collect and remit sales or use tax; or (ii) comply with the notice and reporting requirements discussed below.5 Beginning June 1, 2019, the election must be made each calendar year by June 1. If remote sellers, marketplace facilitators or referrers do not make an election, they are deemed to have elected to comply with the notice and reporting requirements.6

To prevent overbroad application of these rules, the requirement by marketplace facilitators to make an election only applies to: (i) sales through the marketplace facilitator’s forum made by or on behalf of a marketplace seller that does not maintain a place of business in Oklahoma; and (ii) sales made by a marketplace facilitator on its own behalf if it does not maintain a place of business in Oklahoma.7 Likewise, the requirement by referrers to make an election only applies to sales: (i) directly resulting from a referral of a purchaser to a marketplace seller that does not maintain a place of business in Oklahoma; (ii) directly resulting from a referral of a purchaser to a remote seller; and (iii) of the referrer’s own products if the referrer does not maintain a place of business in Oklahoma.8

An election made by July 1, 2018 is in effect for the Oklahoma fiscal year beginning on that date, and ending on June 30, 2019.9 An election to comply with the notice and reporting requirements may be changed to an election to collect and remit tax. The new election is effective 30 days after the filing and applies to the remainder of the current Oklahoma fiscal year and the following Oklahoma fiscal year.

Notice and reporting requirements The legislation provides notice and reporting requirements that apply to remote sellers and marketplace facilitators. Separate but similar requirements apply to referrers.

Notice to Purchasers Remote sellers and marketplace facilitators must post a conspicuous notice on their forum informing purchasers intending to purchase tangible personal property for delivery in Oklahoma that:

  • Sales or use tax may be due on the purchase and delivery of the tangible personal property;
  • Oklahoma requires the purchaser to file a return if use tax is due on the purchase and delivery; and
  • The notice is required under Oklahoma law.10

Also, remote sellers and marketplace facilitators must provide a written notice to each purchaser at the time of each sale that includes:

  • A statement that sales or use tax is not being collected on the purchase;
  • A statement that the purchaser may be required to remit use tax directly to the Commission; and
  • Instructions for obtaining additional information from the Commission regarding whether and how to remit use tax.11

Referrers must post a conspicuous notice on their platform informing purchasers intending to purchase tangible personal property for delivery in Oklahoma that includes the following:

  • Sales or use tax may be due on the purchase and delivery;
  • The person to which the purchaser is being referred may or may not collect and remit sales or use tax to the Commission on the transaction;
  • Oklahoma requires the purchaser to file a return if use tax is due on the purchase and delivery and not collected by the person;
  • The notice is required under Oklahoma law;
  • Instructions for obtaining additional information from the Commission regarding whether and how to remit use tax; and
  • 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 Commission about the purchaser’s potential use tax liability.12

Report to Purchasers or Remote Sellers Remote sellers and marketplace facilitators that do not elect to collect and remit sales or use tax must, by Jan. 31 of each year, provide a written report to each purchaser required to receive the statutory notice discussed above that includes:

  • A statement that the remote seller or marketplace facilitator did not collect sales or use tax on the purchaser’s transactions and that the purchaser may be required to remit use tax;
  • 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 Oklahoma;
  • Instructions for obtaining additional information form the Commission regarding whether and how to remit use tax;
  • A statement that the remote seller or marketplace facilitator is required to submit a report to the Commission as discussed below that includes the purchaser’s name and the aggregate dollar amount of its purchases from the remote seller or marketplace facilitator; and
  • Any additional information that the Commission may reasonably require.13

Referrers that do not elect to collect and remit sales or use tax must, by Jan. 31 of each year, provide a written notice to each remote seller to whom the referrer transferred a potential purchaser in Oklahoma during the prior year that includes: (i) a statement that sales or use tax may be imposed on the transaction; (ii) a statement that the remote seller may be required to make the election discussed above; and (iii) instructions for obtaining additional information from the Commission.14

Report to Commission Remote sellers and marketplace facilitators that do not elect to collect and remit sales or use tax must, no later than Jan. 31 of each year, submit a report to the Commission. The report must include for each purchaser required to receive the notice discussed above:

  • The purchaser’s name;
  • The purchaser’s billing address and, if different, the purchaser’s last-known mailing address;
  • The delivery address in Oklahoma;
  • The aggregate dollar amount of the purchaser’s purchases from the remote seller or marketplace facilitator; and
  • The name and address of the remote seller, marketplace facilitator or marketplace seller that made the sales to the purchaser.15

Referrers that do not elect to collect and remit sales or use tax must, by January 31 of each year, submit a report to the Commission that includes a list of persons who received the required notice.16

Penalties The Commission is directed to assess a penalty of $20,000 or 20 percent of total sales in Oklahoma during the previous 12 months, whichever is less, against remote sellers, marketplace facilitators or referrers that make or are deemed to make an election to comply with the notice and reporting requirements and fail to satisfy the requirements.17 If remote sellers, marketplace facilitators or referrers make an election to collect and remit sales or use tax, the existing statutory penalties and interest relating to collection and remittance of sales or use tax apply.18

Commentary Many states are experiencing a significant decrease in sales and use tax collections because sellers without a physical presence in a state are not required to collect sales and use tax. Following the lead of states such as Pennsylvania,19 Rhode Island20 and Washington,21 Oklahoma is the latest state to require that remote sellers, marketplace facilitators and referrers either register to collect and remit sales and use tax or otherwise comply with burdensome notice and reporting requirements. The complex requirements provide a strong incentive for remote sellers, marketplace facilitators and referrers to collect and remit Oklahoma sales and use tax, rather than undertaking compliance with the burdensome notice requirements. According to Governor Fallin, the legislation is estimated to annually raise approximately $20.5 million for public schools.22

The lasting effect of Oklahoma’s sales and use tax notice and reporting requirements may be limited given the U.S. Supreme Court’s pending consideration of South Dakota v. Wayfair, Inc.23 At issue in this case is the constitutionality of South Dakota’s economic nexus law imposing a “bright-line” presence standard in order to trigger a sales and use tax collection obligation.24 South Dakota’s law directly contravenes the long-standing physical presence standard for sales and use tax nexus pronounced in Quill Corp. v. North Dakota.25 If the Court upholds the constitutionality of South Dakota’s economic nexus law, state notice and reporting laws may become moot, as states would then be permitted to require remote sellers to collect and remit sales and use tax without having in-state physical presence.


 
1 H.B. 1019, Laws 2018, 2nd Extraordinary Session.
2 A “remote seller” is a person, other than a marketplace facilitator, marketplace seller or referrer, who does not maintain a place of business in Oklahoma that, through a forum, sells tangible personal property at retail that is subject to Oklahoma sales or use tax. OKLA. STAT. tit. 68, § 1391.8. A “forum” is a place where sales at retail occur, whether physical or electronic. OKLA. STAT. tit. 68, § 1391.2.
3 A “marketplace facilitator” is a person that facilitates the sale at retail of tangible personal property. A person facilitates a sale at retail if the person or an affiliate: (i) lists or advertises tangible personal property for sale at retail in any forum; and (ii) either directly or indirectly through agreements with third parties, collects the payment and transmits it to the seller. OKLA. STAT. tit. 68, § 1391.3. A “marketplace seller” is a person that has an agreement with a marketplace facilitator to facilitate sales for the person. OKLA. STAT. tit. 68, § 1391.4.
4 A “referrer” is a person, other than a person engaging in the business of printing or publishing a newspaper, that, under an agreement with a marketplace seller or remote seller: (i) agrees to list or advertise for sale at retail one or more products of the marketplace seller or remote seller in a physical or electronic medium; (ii) receives consideration from the marketplace seller or remote seller from the sale offered in the listing or advertisement; (iii) transfers by telecommunications, Internet link or other means, a purchaser or marketplace seller, remote seller or affiliated person to complete a sale; and (iv) does not collect a receipt from the purchaser for the sale. The term excludes a person that: (i) provides Internet advertising services; and (ii) does not provide the marketplace seller’s or remote seller’s shipping terms or advertise whether a marketplace seller or remote seller collects sales or use tax. OKLA. STAT. tit. 68, § 1391.7.
5 OKLA. STAT. tit. 68, § 1392.A.
6 OKLA. STAT. tit. 68, § 1392.F.
7 OKLA. STAT. tit. 68, § 1392.C.
8 OKLA. STAT. tit. 68, § 1392.D.
9 OKLA. STAT. tit. 68, § 1392.E.
10 OKLA. STAT. tit. 68, § 1393.B.1.
11 OKLA. STAT. tit. 68, § 1393.B.2. The notice to purchasers must be prominently displayed on all invoices and order forms and on each sales receipt or similar document, whether in paper or electronic form, provided to the purchaser. OKLA. STAT. tit. 68, § 1393.C.
12 OKLA. STAT. tit. 68, § 1393.D. This notice must be prominently displayed and may include pop-up boxes or notification by other means that appears when the referrer transfers a purchaser to another person to complete the sale. OKLA. STAT. tit. 68, § 1393.E.
13 OKLA. STAT. tit. 68, § 1394.A. The report must be mailed by first-class mail in an envelope prominently indicating that important tax information is enclosed. OKLA. STAT. tit. 68, § 1394.C.
14 OKLA. STAT. tit. 68, § 1394.D.
15 OKLA. STAT. tit. 68, § 1395.A.
16 OKLA. STAT. tit. 68, § 1395.B.
17 OKLA. STAT. tit. 68, § 1396.A. The penalty will be assessed separately for each violation but may only be assessed once in a calendar year.
18 OKLA. STAT. tit. 68, § 1396.B. The penalties or interest under this provision may be abated or reduced in certain circumstances. OKLA. STAT. tit. 68, § 1396.C, D. For the existing penalty and interest provisions, see OKLA. STAT. tit. 68, § 217.
19 For further information on the Pennsylvania legislation, see GT SALT Alert: Pennsylvania Enacts Legislation Imposing Collection and Reporting Requirements on Marketplace Sales, Modifying Net Loss Deduction Limitation.
20 For a discussion of the Rhode Island legislation, see GT SALT Alert: Rhode Island Imposes Notice and Reporting Requirements on Non-Collecting Retailers; Establishes Tax Amnesty Program.
21 For further information on the Washington legislation, see GT SALT Alert: Washington Imposes Collection and Remittance, Notice and Reporting Requirements on Marketplace Facilitators.
22 Press Release, Office of Oklahoma Governor, April 10, 2018.
23 U.S. No. 17-494, cert. granted, Jan. 12, 2018. The U.S. Supreme Court heard oral arguments for this case on April 17, 2018.
24 For further information, see GT SALT Alert: South Dakota Supreme Court Holds Law Challenging Quill’s Physical Presence Requirement Is Unconstitutional.
25 504 U.S. 298 (1992).




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