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Oklahoma Gov. Mary Fallin signed legislation enacting the Oklahoma Retail Protection Act of 2016, which includes affiliate nexus and reporting requirements provisions. This new Act modifies legislation originally passed in 2010 which included affiliate nexus and reporting rules.

 

The changes contained in the new legislation take effect on November 1, 2016. The legislation amends the definition of "maintaining a place of business in this state" to include utilizing or maintaining in Oklahoma (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), or having agents operating in Oklahoma, whether the place of business or agent is within the state temporarily or permanently or whether the person or agent is authorized to do business in the state; and the presence of any person (other than a common carrier) who has substantial nexus in Oklahoma and who:

 

  • sells a similar line of products as the vendor under the same or a similar business name;
  • uses trademarks, service marks, or trade names in Oklahoma that are the same or substantially similar to those used by the vendor;
  • delivers, installs, assembles, or performs maintenance services for the vendor;
  • facilitates the vendor's delivery of property to customers in the state by permitting the vendor's customers to pick up property sold by the vendor at an office, distribution facility, warehouse, storage place, or similar place of business maintained by the person in Oklahoma; or
  • conducts any other activities in Oklahoma that are significantly associated with the vendor's ability to establish and maintain a market in the state for the vendor's sale.

 

The nexus presumption is rebuttable by showing that the person's activities in Oklahoma are not significantly associated with the vendor's ability to establish and maintain a market in the state for the vendor's sales. Finally, any ruling, agreement, or contract between a person and the executive branch of Oklahoma, or any other state agency or department, that states, agrees, or rules that the person is not "maintaining a place of business in this state" or is not required to collect sales and use tax in Oklahoma despite the presence of a warehouse, distribution center, or fulfillment center in the state that is owned or operated by the vendor or an affiliated person of the vendor, is null and void unless specifically approved by a majority vote of each house of the Oklahoma Legislature.

 

The legislation also removes the following affiliate nexus criteria which existed in the 2010 legislation from the use tax code:

 

  • the retailer holds a substantial ownership interest in, or is owned in whole or in substantial part by, a retailer maintaining a place of business within the state and the retailer sells the same or a substantially similar line of products as the related Oklahoma retailer and does so under the same or a substantially similar business name, or the Oklahoma facilities or Oklahoma employees of the related Oklahoma retailer are used to advertise, promote or facilitate sales by the retailer to consumers;
  • the retailer holds a substantial ownership interest in, or is owned in whole or in substantial part by, a business that maintains a distribution house, sales house, warehouse or similar place of business in Oklahoma that delivers property sold by the retailer to consumers; or
  • a retailer is part of a "controlled group of corporations" having a "component member" that is a retailer engaged in business in Oklahoma.

 

The use tax code is also amended to no longer provide that a "retailer" includes making sales of tangible personal property to purchasers in Oklahoma by mail, telephone, the Internet, or other media who has contracted with an entity to provide and perform installation or maintenance services for the retailer's purchasers in Oklahoma. The use tax code is also amended to no longer state that the processing of orders electronically does not relieve a retailer of the duty to collect tax from the purchaser if the retailer is doing business in Oklahoma.

 

To incent remote sellers to register to collect Oklahoma use tax, the legislation expands the state’s out-of-state retailer use tax registration, collection, and remittance compliance initiatives to also apply to sales tax. Under the amended initiative, the state will not seek payment of uncollected use taxes from an out-of-state retailer who registers to collect and remit applicable sales and use taxes on sales made to purchasers in Oklahoma prior to registration under the initiative, provided that the retailer was not registered in Oklahoma in the 12-month period preceding November 1, 2016. Other changes concerning the compliance initiatives include the removal of provisions:

 

  • prohibiting an out-of-state retailer’s registration to collect use tax under the initiative as a factor in determining nexus for other Oklahoma taxes,
  • allowing out-of-state retailers registering under the initiative a vendor discount for timely reporting and remittance of use tax, and
  • prohibiting the charging of a registration fee against an out-of-state retailer who voluntarily registers to collect and remit use tax under the initiative.

 

The legislation precludes assessments for uncollected sales and use taxes (including penalties and interest) for sales made during the period a retailer was not registered in Oklahoma, so long as registration occurs before May 1, 2017. This provision could be beneficial for companies with questionable or actual nexus in Oklahoma as this appears to be a full forgiveness amnesty for prior periods.

 

The Oklahoma Tax Commission will implement an outreach program under which online retailers and out-of-state retailers will be contacted for a review of their business activities to determine if their activities require the registration and collection of Oklahoma use taxes.

 

Changes to the 2010 reporting and notice requirements are also included in the new legislation.  Out-of-state retailers who are not required to collect Oklahoma use tax and who make sales of tangible personal property to Oklahoma customers for use in the state, must, by February 1st of each year, provide each of these customers a statement of the total sales made to them during the preceding calendar year. The statement must contain language substantially similar to: "You may owe Oklahoma use tax on purchases you made from us during the previous tax year. The amount of tax you owe is based on the total sales price of [insert total sales price] that must be reported and paid when you file your Oklahoma income tax return unless you have already paid the tax."The statement cannot contain any other information that would indicate, imply, or identify the class, type, description, or name of the products sold. The 2010 legislation had a sales threshold which no longer applies.  (H.B. 2531, Laws 2016)

 

 

 

 

(06/06/2016)

On June 15, 2015, Representative Jason Chaffetz (R-UT) introduced the Remote Transactions Parity Act (RTPA) of 2015 in the U.S. House of Representatives. The bill – similar to the Marketplace Fairness Act (MFA) of 2015 – pertains to sales and use taxcollection obligations for remote sellers, but the RTPA contains some differences and several additional provisions. Unlike the MFA’s $1 million small seller exception, the RTPA’s small seller exception is as follows: first year: $10 million; second year: $5 million; third year: $1 million. The exception goes away in the fourth year. Furthermore, under the RTPA sellers utilizing an electronic marketplace are not considered small sellers and are not entitled to the exception, no matter the year. Under the RTPA, sellers would not be audited by states where they don’t have a physical presence. There would be a three year statute of limitations for assessments on remote sellers. The bill would enable remote sellers to refund over-collected tax to customers. The RTPA also specifies that a state would not be authorized to impose a sales and use tax collection requirement on remote sellers until it has certified multiple software providers that are certified in all states seeking to impose authorization requirements. The RTPA would also allow customers to pursue refunds of over-collected tax from remote sellers. However, RTPA does not preempt states from imposing sales and use taxes on remote sellers that do not have physical presence under this definition. It merely authorizes states to impose sales and use tax on remote sellers without a physical presence. Under the RTPA, if a seller has nexus under existing law, including Quill v. North Dakota, then the state may still impose a sales and use tax collection requirement.  The bill is assigned to the Judiciary Committee just like the MFA.  On July 1, 2015 it was referred to the Subcommittee on Regulatory Reform, Commercial And Antitrust Law. (H.R. 2775, the Remote Transactions Parity Act of 2015)

 

UPDATE: This bill failed to pass during the 114th Congressional Session running from January 3, 2015 to January 3, 2017.  Therefore, this bill has died and would need to be reintroduced to be considered and voted on.

(09/08/2015)

On March 10, 2015, a bipartisan group of senators introduced the Marketplace Fairness Act of 2015. Similar legislation – the Marketplace Fairness Act of 2013 – was previously introduced in February 2013 and passed by the Senate on May 6, 2013. That legislation failed to be enacted. If passed, the Marketplace Fairness Act of 2015 would authorize states meeting certain requirements to require remote sellers that do not meet a "small seller exception" to collect their state and local sales and use taxes. For more information on the previous legislation, visit Federal Government Introduces New Remote Seller Bill. (Marketplace Fairness Act of 2015, March 10, 2015)

 

UPDATE: This bill failed to pass during the 114th Congressional Session running from January 3, 2015 to January 3, 2017.  Therefore, this bill has died and would need to be reintroduced to be considered and voted on.

(03/16/2015)

The federal Marketplace Fairness Act of 2013 was introduced in the House of Representatives and the Senate on February 14, 2013.  If passed, the bill would authorize states that meet certain requirements to require remote sellers that do not meet a "small seller exception" to collect their state and local sales and use taxes.  Under the legislation, a state would be authorized to require a remote seller to collect sales and use taxes only if the remote seller has gross annual receipts in total remote sales in the United States of more than $1 million in the preceding calendar year.

 

Member states of the Streamlined Sales and Use Tax (SST) Agreement would be authorized to require all sellers that do not qualify for the small seller exception to collect and remit sales and use taxes with respect to remote sales sourced to that member state pursuant to the provisions of the SST Agreement. The SST Agreement would have to include certain minimum simplification requirements. An SST member state could begin to exercise authority under the Act beginning 90 days after the state publishes notice of its intent to exercise such authority, but no earlier than the first day of the calendar quarter that is at least 90 days after the date of the enactment of the Act.

 

States that are not members of the SST Agreement would be authorized, notwithstanding any other provision of law, to require all sellers that do not qualify for the small seller exception to collect and remit sales and use taxes with respect to remote sales sourced to the state if the state implements certain minimum simplification requirements. The authority would begin no earlier than the first day of the calendar quarter that is at least six months after the state enacts legislation to exercise the authority granted by the Act.

 

To enforce collection requirements on remote sellers that do not meet the small seller exception, states that are not members of the SST Agreement would have to implement the minimum simplification requirements listed below. For SST member states to have collection authority, the requirements would have to be included in the SST Agreement.

 

-       A single entity within the state responsible for all state and local sales and use tax administration, return processing, and audits for remote sales sourced to the state

-       A single audit of a remote seller for all state and local taxing jurisdictions within that state

-       A single sales and use tax return to be used by remote sellers to be filed with the single entity responsible for tax administration.

-       Each state would have to provide a uniform sales and use tax base among the state and the local taxing jurisdictions within the state.

-       Each state would have to source all interstate sales in compliance with the sourcing definition outlined below.

-       Each state would have to provide information indicating the taxability of products and services along with any product and service exemptions from sales and use tax in the state and a rates and boundary database. States would have to provide free software for remote sellers that calculates sales and use taxes due on each transaction at the time the transaction is completed, that files sales and use tax returns, and that is updated to reflect state and local rate changes. States would also have to provide certification procedures for persons to be approved as certified software providers (CSPs). Such CSPs would have to be capable of calculating and filing sales and use taxes in all the states qualified under the Act.

-       Each state would have to relieve remote sellers from liability to the state or locality for incorrect collection, remittance, or noncollection of sales and use taxes, including any penalties or interest, if the liability is the result of an error or omission made by a CSP.

-       Each state would have to relieve CSPs from liability to the state or locality for the incorrect collection, remittance, or noncollection of sales and use taxes, including any penalties or interest, if the liability is the result of misleading or inaccurate information provided by a remote seller.

-       Each state would have to relieve remote sellers and CSPs from liability to the state or locality for incorrect collection, remittance, or noncollection of sales and use taxes, including any penalties or interest, if the liability is the result of incorrect information or software provided by the state.

-       Each state would have to provide remote sellers and CSPs with 90 days’ notice of a rate change by the state or any locality in the state and update the taxability and exemption information and rate and boundary databases, and would have to relieve any remote seller or CSP from liability for collecting sales and use taxes at the immediately preceding effective rate during the 90-day notice period if the required notice is not provided.

 

For non-SST member states, the location to which a remote sale is sourced would be the location where the item sold is received by the purchaser, based on the location indicated by instructions for delivery. When no delivery location is specified, the remote sale is sourced to the customer's address that is either known to the seller or, if not known, obtained by the seller during the transaction, including the address of the customer's payment instrument if no other address is available. If an address is unknown and a billing address cannot be obtained, the remote sale is sourced to the address of the seller from which the remote sale was made. SST member states would be required to comply with the sourcing provisions of the SST Agreement.

 

On March 22, 2013, the U.S. Senate voted 75-to-24 in favor of the concept of the Marketplace Fairness Act. The actual Marketplace Fairness Act was introduced in both chambers in February, but last week Senator Enzi, the sponsor of the Senate bill, offered an amendment to the 2014 Budget Resolution that would include insertion of the language of Marketplace Fairness in the budget. It was a largely symbolic tactic since the Budget Resolution itself will not become law, but by approving the amendment, the Senate has shown that there is broad, bipartisan support for the notion of requiring remote sellers to collect sales tax.

 

On May 6, 2013, the U.S. Senate passed the Marketplace Fairness Act with a 69-27 vote.

 

UPDATE: On September 18, 2013, Rep. Bob Goodlatte, the chairman of the House Judiciary Committee released a set of seven principles that he believes any internet sales tax bill should meet.  The seven principles outlined by Goodlatte are tax relief, tech neutrality, no regulation without representation, simplicity, tax competition, states’ rights, and privacy rights.  For more details on the principles, click here to see the House Judiciary Committee’s press release.

 

We are continuing to track the activities of these bills.  We are also involved in planning efforts involving states and businesses regarding the potential implementation consequences of passage.  Watch for updates in the Sales Tax Compass as well as through our Twitter account and LinkedIn updates. 

 

The text of the bill passed by the Senate can be viewed here.

 

For an update on this news item, visit Senate Introduces Marketplace Fairness Act of 2015.

 

(H.R. 684 and S. 336, as introduced in Congress on February 14, 2013; S.743, as passed by the U.S. Senate on May 6, 2013)

(09/20/2013)

The governor of Oklahoma has signed HB 2359 effective June 9, 2010 which amends the definition of retailer to include remote retailers who are owned by a retailer maintaining a place of business in Oklahoma if the local retailers holds a substantial interest (greater than 10% ownership) and the local retailer sells the same or substantially similar line of products as the remote retailer using the same or substantially similar name. Other specific provisions apply that could establish nexus and therefore a collection responsibility on the remote seller. Additionally, the bill requires remote retailers that are not required to collect tax in Oklahoma to provide notice to customers that use tax applies to the purchases. Retailers are prohibited from advertising that sales tax does not apply to the purchases. The Oklahoma Tax Commission is working on a draft of an emergency rule that would dictate how certain internet and catalog retailers give notice of use tax requirement to customers in Oklahoma. If the retailer does not provide an invoice, a confirmation e-mail containing the notice would be considered sufficient. Online auction websites would also be affected by the proposed rule. The rule’s requirements would not apply to retailers with total Oklahoma gross sales of less than $100,000 in the prior year and the reasonable expectation of less than $100,000 in sales in the current year. The requirements outlined in the proposed rule would not take effect until an emergency or permanent administrative rule is passed. (HB 2359, Press Release, Oklahoma Tax Commission, June 30, 2010)

 

For an update on this news item, see Oklahoma Enacts Affiliate Nexus and Reporting Requirements Changes

(08/17/2010)

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