Oklahoma Enacts Marketplace Nexus Legislation

Oklahoma has enacted legislation requiring marketplace facilitators, remote sellers and referrers to either collect and remit Oklahoma sales tax or comply with notice and reporting requirements. This is in response to recent education funding challenges and includes specific distribution rules for the additional sales and use tax revenues generated from these provisions.  This is the third version of notice and reporting provisions passed by Oklahoma in efforts to encourage remote sellers, marketplace providers and referrers to register to collect the sales tax.

These provisions are effective April 10, 2018, however, the initial election is not due until July 1, 2018.  By July 1, 2018, and by June 1 of each calendar year starting in 2019, a marketplace facilitator, remote seller  or referrer who had at least $10,000 in aggregate Oklahoma sales in the preceding 12 month calendar period must either file an election with the Oklahoma Tax Commission (OTC) to collect and remit sales and use tax due on tangible personal property (TPP) and obtain a sales tax permit; or comply with notice and reporting requirements.

An election made on or before July 1, 2018, will be in effect for the 2018-2019 fiscal year. A remote seller, marketplace facilitator or referrer may change an election to comply with the notice and reporting requirements to an election to collect and remit tax at any time during a fiscal year by filing a new election with the OTC and obtaining a permit. The new election will be effective thirty days after the filing and will be effective for the balance of the fiscal year in which the new election was filed and for the next succeeding fiscal year. A remote seller, marketplace facilitator or a referrer who does not submit an election will be deemed to have elected to comply with the notice and reporting requirements.

A “marketplace facilitator” facilitates a sale at retail of TPP if the person or an affiliated person lists or advertises TPP for sale at retail in any forum, and either directly or indirectly through agreements or arrangements with third parties, collects the payment from the purchaser and transmits the payment to the person selling the property.

“Affiliated person” means a person that, with respect to another person has a direct or indirect ownership interest of more than 5% in the other person, or is related to the other person because a third person, or group of third persons who are affiliated with each other holds a direct or indirect ownership interest of more than 5% in the related person

“Forum” means a place where sales at retail occur, whether physical or electronic.

“Remote seller” means a person, other than a marketplace facilitator, a marketplace seller or a referrer, that does not maintain a place of business in Oklahoma that makes retail sales of TPP through a forum. The term does not include an employee who in the ordinary scope of employment renders services to his employer in exchange for wages and salaries.

“Referrer” means a person, other than a person engaging in the business of printing or publishing a newspaper, that, pursuant to an agreement or arrangement with a marketplace seller or remote seller, does the following:

  • 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,
  • receives consideration from the marketplace seller or remote seller from the sale offered in the listing or advertisement,
  • transfers by telecommunications, Internet link or other means, a purchaser to a marketplace seller, remote seller or affiliated person to complete a sale, and
  • does not collect a receipt from the purchaser for the sale.

“Referrer” does not include a person that provides Internet advertising services and does not provide the marketplace seller’s or remote seller’s shipping terms or advertise whether a marketplace seller or remote seller collects a sales or use tax.

A remote seller or marketplace facilitator electing to comply with the notice and reporting requirements must post a conspicuous notice on its forum that informs purchasers intending to purchase TPP for delivery in Oklahoma that includes all of the following:

  • sales or use tax may be due in connection with the purchase and delivery of the TPP,
  • the state requires the purchaser to file a return if use tax is due in connection with the purchase and delivery, and
  • the notice is required by 68 O.S. §1393.

A remote seller or marketplace facilitator must also provide a written notice to each purchaser at the time of each sale that includes all of 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 OTC, and
  • instructions for obtaining additional information from the OTC regarding whether and how to remit use tax to the OTC.

A referrer electing to comply with the notice and reporting requirements must post a conspicuous notice on its platform that informs purchasers intending to purchase TPP for delivery in Oklahoma that includes all of the following:

  • Sales or use tax may be due in connection with 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 OTC in connection with the transaction;
  • The state requires the purchaser to file a return if use tax is due in connection with the purchase and delivery and not collected by the person;
  • The notice is required by 68 O.S. §1393;
  • Instructions for obtaining additional information from the OTC regarding whether and how to remit use tax to the OTC; 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 the OTC about the purchaser’s potential use tax liability.

Remote sellers and marketplace facilitators who do not elect to collect and remit tax also have a reporting obligation. By January 31 each year, they must provide a written report to each purchaser required to receive the above notice during the immediately preceding calendar year that includes all of the following:

  • A statement that the remote seller or marketplace facilitator did not collect sales or use tax in connection with the purchaser’s transactions with the remote seller or marketplace facilitator and that the purchaser may be required to remit use tax to the OTC;
  • 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 within this state;
  • Instructions for obtaining additional information from the OTC regarding whether and how to remit use tax to the OTC;
  • A statement that the remote seller or marketplace facilitator is required to submit a report to the OTC that includes the name of the purchaser and the aggregate dollar amount of the purchaser’s purchases from the remote seller or marketplace facilitator; and
  • Such additional information as the OTC may reasonably require.

This notice must be shall be mailed by first-class mail in an envelope prominently marked with words indicating that important tax information is enclosed to the purchaser’s billing addresses, if known, or, if unknown, to the purchaser’s shipping address. If the purchaser’s billing and shipping addresses are unknown, the report shall be sent electronically to the purchaser’s last-known email address with a subject heading indicating that important tax information is being provided.

Additionally, by January 31 of each year, remote sellers and marketplace facilitators who do not elect to collect and remit tax must submit a report to the OTC. The report shall include, with respect to each purchaser required to receive the notice during the immediately preceding calendar year, the following:

  • The purchaser’s name;
  • The purchaser’s billing address and, if different, the purchaser’s last-known mailing address;
  • The address within this state to which products were delivered to the purchaser;
  • 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.

A referrer that does not elect to collect and remit tax must, by January 31 of each year, provide a written notice to each remote seller to whom the referrer transferred a potential purchaser located in Oklahoma during the immediately preceding calendar year that includes all of the following:

  • A statement that a sales or use tax may be imposed by the state on the transaction;
  • A statement that the remote seller may be required to make the election required by this act; and
  • Instructions for obtaining additional information regarding sales and use tax from the OTC.

A referrer that does not elect to collect and remit tax must, by January 31 of each year, provide a report to the OTC that includes a list of persons who received the notice required under this act.

The OTC will assess a penalty of $20,000 or 20% of total sales in Oklahoma during the previous 12 months, whichever is less, against a remote seller, a marketplace facilitator or a referrer that makes an election to comply with the notice and reporting requirements or is deemed to have made such election and fails to comply with the requirements. The penalty will be assessed separately for each violation but may only be assessed once in a calendar year. For five years after this penalty provision takes effect, the OTC can abate or reduce the penalty or interest due to hardship or good cause.  (H.B. 1019, Laws 2018, Second Extraordinary Session, effective April 10, 2018)

UPDATE: In light of the South Dakota v. Wayfair decision, the Oklahoma State Tax Commission (OTC) issued guidance for remote sellers on August 31, 2018. The notice states, “Remote sellers are now required to collect and remit sales or use taxes on all orders delivered to Oklahoma, whether or not the seller has a physical presence in the state. This includes online and mail-order companies.” The state’s law requires that remote sellers that sold at least $10,000 in taxable sales into Oklahoma during the previous 12 months collect and remit tax or comply with statutory notice and reporting requirements. Oklahoma law also requires marketplace facilitators and referrers to file an election with the OTC – and either collect and remit tax or comply with notice and reporting requirements. The OTC encourages sellers who fall under any of preceding descriptions to register as soon as possible. The OTC also noted that it is in the process of simplifying its application for remote sellers. Read the full notice.

Posted on April 19, 2018