Amazon Collecting Oklahoma Sales Tax on Behalf of 3rd Party Sellers

by TaxJar July 6, 2018

Starting July 1, Amazon will now collect Oklahoma sales tax on behalf of 3rd party sellers on the platform. This change in how Amazon collects sales tax is due to Oklahoma’s new “Marketplace Facilitator” law. This law follows on the heels of Washington’s and Pennsylvania’s “Marketplace Facilitator” laws and is somewhat similar.

We get a lot of questions from online sellers when Amazon makes big changes like this, so here are the most common questions and answers:

Why is Amazon now collecting and remitting Oklahoma sales tax on behalf of 3rd party sellers?

Oklahoma’s Marketplace Facilitator Law recently went into effect. Under this law, Amazon is considered a “marketplace” because they are an entity that “lists or advertises tangible personal property for retail sale on any ‘forum,’” and “directly or indirectly, through agreements or arrangements with third parties, collects the purchaser’s payment and sends it to the seller.”

Under the new law, any marketplace (like Amazon) who falls into this criteria has two choices:

Collect sales tax on behalf of 3rd party sellers using the platform
Elect to follow Oklahoma’s “notice and report” requirements (you can read more about state use tax notice & report requirements here)

Why did this happen now?

Oklahoma’s law specified that marketplaces were required to begin collecting sales tax on behalf of 3rd party sellers on July 1, 2018.

Will other marketplaces also begin collecting Oklahoma sales tax on my behalf?

As of this writing, no other marketplace has announced that they will begin collecting Oklahoma sales tax on behalf of 3rd party sellers. This may change in the future, so keep an eye out for notices from your marketplaces.

Do I need to register for an Oklahoma sales tax permit?

That depends on if you have sales tax nexus in Oklahoma. Factors that create sales tax nexus in Oklahoma include:

A location or place of business
Inventory in a warehouse (While that will soon change, Amazon does not currently have a fulfillment center in Oklahoma.)
Employees or personnel
Economic nexus in the state (i.e. making more than $10,000 in non-Amazon sales in the previous 12 months)
Other factors – You can read more about what creates nexus in Oklahoma here.

If you do not meet any of the criteria to establish nexus in Oklahoma, then it’s unlikely you need a sales tax permit.

However, if you have nexus in the state and sell taxable items in the state, then you are required to register for an Oklahoma sales tax permit. We recommend speaking with a vetted sales tax expert if you have questions about your business’s sales tax liability.

Important note about economic nexus in Oklahoma: Oklahoma is home to what is called a “notice and report law.” If you have no other nexus in the state, but make more than $10,000 in non-Amazon sales in the state, then Oklahoma law requires you to either:

register for an Oklahoma sales tax permit and collect sales tax from Oklahoma buyers
comply with the state’s stringent reporting requirements to both buyers and the state taxing authorities

I’m already registered to collect sales tax in Oklahoma. Can I cancel my Oklahoma sales tax permit?

No. This is a common misconception when Amazon begins collecting sales tax in a state. If you have sales tax nexus in a state and sell taxable items in a state, you are required to hold a valid sales tax permit in that state. For example, if you live in Oklahoma but only sell on Amazon, you still have nexus in the state because your business is located there.

Further, if you make sales on other platforms like Shopify, WooCommerce, etc. then you’d still be required to collect sales tax from Oklahoma customers.

I understand that Amazon will collect and remit sales tax on my behalf. Do I still have to file an Oklahoma sales tax return?

Since this just went into effect and Oklahoma hasn’t issued explicit guidance yet, the answer is “it depends.” If you have nexus in Oklahoma, you will still be required to file an Oklahoma sales tax return. It remains to be seen if some online sellers will be able to cancel Oklahoma sales tax returns. (See the question: “I’m already registered to collect sales tax in Oklahoma. Can I cancel my Oklahoma sales tax permit?” above.”)

Here are a few potential scenarios:

You have an active Oklahoma sales tax permit – If you have an active sales tax permit, you should always file a sales tax return by the due date to avoid fines and penalties.
You only sell on Amazon – If you do not currently hold an active Oklahoma sales tax permit, only sell on Amazon, do not have any physical presence (employee, inventory, etc.) in the state of Oklahoma, and do not make more than $10,000 in non-Amazon sales into the state, then you likely will not need to file an Oklahoma sales tax return.
You sell on Amazon and other online shopping carts and marketplaces – If you have nexus in Oklahoma and make sales on other marketplaces aside from Amazon, you will still be required to file and pay Oklahoma sales tax by your assigned due date every month, quarter or year.

What if I’m not sure what to do next?

We spoke with Mike Fleming of Sales Tax and More to help prepare this post. We always recommend speaking with Mike, or another vetted sales tax expert to help you determine your business’s specific sales tax needs.