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Oklahoma has issued a letter ruling regarding the taxability of items rented by a contractor to fulfill a church construction contract. Oklahoma tax law allows a contractor who has a construction contract with a church and any subcontractors to that construction contract, to make purchases of tangible personal property or services, which are necessary for carrying out the construction contract, exempt from sales and use tax. The letter ruling states that the rental of items would qualify for the tax exemption if the items were necessary to complete the church construction.(Letter Ruling 16-009, Oklahoma Tax Commission, June 28, 2016)


On April 27, 2017, a bipartisan group of senators introduced the Marketplace Fairness Act of 2017 (MFA). Similar legislation was introduced in both 2013 and 2015 and failed to be enacted both times. If enacted, the legislation 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. The small seller exception is set again at $1 million of remote sales annually. The only other significant change from the 2015 version is a prohibition of making the effective date during the 4th quarter of the calendar year. For information on the previous versions of the bill, visit Senate Introduces Marketplace Fairness Act of 2015.  


On April 27, 2017, a bipartisan group of lawmakers introduced the Remote Transactions Parity Act (RTPA) of 2017. Similar legislation was introduced in 2015 but failed to be enacted. Like the MFA, the legislation would also create sales and use tax collection obligations for remote sellers, but has some differences and additional provisions. Some key differences from the Marketplace Fairness Act include a different definition of a small seller.  The RTPA has a phased in threshold starting at $10million in year one, then $5million, then $1million.  In year 4, there is no threshold.  In addition to the monetary thresholds, any seller that sells on an electronic marketplace is considered a small seller.  A difference from the 2015 version of the bill is an inclusion of a definition of remote seller which specifies when a company is NOT a remote seller which includes physical presences for more than 15 days in a state, leasing or owning real property and using an agent to establish or maintain the market in a state if the agent does not perform business services in the state for any other person during the taxable year.  For more information on the Remote Transaction Parity Act of 2015, visit House Introduces Remote Transactions Parity Act of 2015. (Marketplace Fairness Act of 2017, Remote Transactions Parity Act of 2017)


On August 25, 2016, House Judiciary Committee Chairman Robert Goodlatte released a discussion draft of the Online Sales Simplification Act of 2016. The legislation would implement a “hybrid origin” approach for remote sales. Under the legislation, states could impose sales tax on remote sales if the origin state participates in a clearinghouse.In this case, the tax is based on the origin state’s baseand taxability rules. The rate would be the origin state rate, unless the destination state participates. In that case, the rate used would be a single state-wide rate determined by each participating destination state. A remote seller would only remit sales tax to its origin state for all remote sales. Only the origin state would be able to audit a seller for remote sales. Non-participating states would not be able to receive distributions from the clearinghouse. Sellers would be required to provide reporting for remotes sales into participating states to the Clearinghouse so it can distribute the tax to the destination state. We will continue to monitor activity and update when the official bill is introduced.  (Discussion draft of Online Sales Simplification Act of 2016)


On July 14, 2016, Rep. Jim Sensenbrenner (R-WI) introduced the No Regulation Without Representation Act of 2016.  Taking the opposite approach of the Marketplace Fairness Act and Remote Transactions Parity Act, this proposed bill would limit the ability of states to require remote sellers to collect use tax. If enacted, the Act would codify the physical presence requirement established by the US Supreme Court in Quill Corp v. North Dakota.  The bill would define physical presence and create a de minimis threshold. If enacted, the bill would preempt click-through nexus, affiliate nexus, reporting requirements and marketplace nexus legislation. The bill would be effective as of January 1, 2017. The bill defines “seller” and provides that states and localities may not:


  • Obligate a person to collect a sales, use or similar tax; 
  • Obligate a person to report sales; 
  • Assess a tax on a person; or 
  • Treat the person as doing business in a state or locality for purposes of such tax unless the person has a physical presence in the jurisdiction during the calendar quarter that the obligation or assessment is imposed.


Persons would be considered to have a physical presence only if during the calendar year the person: 


  • Owns or leases real or tangible personal property in the state; 
  • Has one or more employees, agents or independent contractors in the state specifically soliciting product or service orders from customers in the state or providing design, installation or repair services there; or 
  • Maintains an office in-state with three or more employees for any purpose.


Physical presence would not include: 


  • Click-through referral agreements with in-state persons who receive commissions for referring customers to the seller; 
  • Presence for less than 15 days in a taxable year; 
  • Product delivery provided by a common carrier; or 
  • Internet advertising services not exclusively directed towards, or exclusively soliciting in-state customers.


The bill defines seller to exclude marketplace providers; referrers; third-party delivery services in which the seller does not have an ownership interest; and credit card issuers, transaction or billing processors or financial intermediaries.Marketplace Providers are defined as any person other than the seller who facilitates a sale which includes listing or advertising the items or services for sale and either directly or indirectly collects gross receipts from the customer and transmits the amounts to the marketplace seller. (No Regulation Without Representation Act of 2016 (H.R. 5893))


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.


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)







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