Sales Tax Fundamentals
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Oklahoma Marketplace Facilitator Law Passes
byApril 18, 2018
Oklahoma just became the latest state to pass a “Marketplace Facilitator Law.” Like Washington and Pennsylvania, Oklahoma will now require some online marketplaces to collect and remit sales tax on behalf of 3rd party sellers or comply with “use tax notice and report” requirements.
What does the Oklahoma Marketplace Facilitator law do?
This law requires that “Marketplace facilitators” in Oklahoma either collect Oklahoma sales tax on behalf of 3rd party sellers or elect to comply with Oklahoma’s notice and report requirements. The law also requires that remote sellers who make at least $10,000 in aggregate sales in Oklahoma in a 12 month period to either collect sales tax or comply with notice and report requirements.
Let’s break it down.
How the Law Affects Marketplaces
Under the new Oklahoma law, a “marketplace facilitator” is someone who “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.” In other words, this is similar to the laws in Washington and Pennsylvania that require marketplaces like Amazon, Walmart and Etsy to collect sales tax on behalf of sellers on the platform. The bill is effective immediately.
The law refers to websites and online marketplaces as “forums.”
The marketplace facilitator has two options:
- Begin collecting sales tax on behalf of 3rd party sellers using the marketplace
- Elect to follow Oklahoma’s “notice and report” requirements. These include:
- posting a conspicuous tax notice on their websites/forums. The notice should state that sales or use tax may be due pursuant to 68 O.S. §1393 and that the Oklahoma purchaser is required to file a return if tax is due
- providing a written notice to each purchaser at the time of sale stating that sales or use tax is not being collected, that the purchaser may be required to remit sales or use tax directly to the Oklahoma Tax Commission. The notice should also give instructions on how to obtain more information about this from the Oklahoma Tax Commission.
- providing a written report to purchasers every year by January 31 telling them they are required to pay use tax on purchases made in the preceding calendar year. The Oklahoma Tax Commission will provide forms for this document.
- providing a written report to the Oklahoma Tax Commission every year reporting on the activities of sellers who did not pay sales tax and thus are required to pay use tax. The Oklahoma Tax Commission will provide forms for this document.
Keep in mind that this is just a summary and it’s a good idea to read the bill yourself or consult with a sales tax expert about how this bill applies to your business. You can read the entire Oklahoma Marketplace Facilitator law here.
How the Law Affects Remote Sellers
Under the law, a remote seller is someone who:
- is not a marketplace facilitator, marketplace seller, or referrer
- does not have a place of business (or other sales tax nexus) in Oklahoma, and
- sells taxable tangible personal property at retail through a forum (such as an online store)
Note: It’s important to highlight that this law applies only to online sellers who do not have nexus in the state of Oklahoma. The purpose of economic nexus laws and notice and report laws like this one are to require out-of-state sellers who were not previously liable to collect sales tax to be required to collect and add money to the state’s coffers.
Remote sellers who make at least $10,000 in aggregate sales to buyers in Oklahoma in the previous 12 calendar months (on a rolling basis) are required to either:
- Register for an Oklahoma sales tax permit and collect and remit Oklahoma sales tax
- Comply with Oklahoma notice and report requirements (see the above section for a summary of notice and report requirements). You can read the notice and report requirements in other states here.
If you make at least $10,000 in aggregate sales to buyers in Oklahoma we recommend speaking with a sales tax expert to determine your best course of action.
How the Law Affects Referrers
A “referrer” for the purposes of this law is a person who:
- agrees to list or advertise for retail sale at least one of the marketplace or remote seller’s products in physical or electronic form
- receives consideration from the sale from the marketplace seller or remote seller
- transfers a purchaser by telecommunications, Internet link, or other means, to a marketplace seller, remote seller or affiliated person to complete a sale
- does not collect a receipt from a purchaser
Like marketplace facilitators and remote sellers, referrers with at least $10,000 in aggregate Oklahoma sales in a calendar year must elect to either collect sales tax from Oklahoma buyers or comply with notice and report laws.
Penalties for Non-Compliance with Oklahoma Notice and Reporting Requirements
Any marketplace facilitator, remote seller or referrer who elects to comply with the notice and reporting requirements but fails to do so, faces the lesser of:
- 20% of total Oklahoma sales in the previous 12 months
The penalty is assessed separately for each violation but can only be assessed once per 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.
Will Amazon, Etsy and Walmart collect Oklahoma sales tax on behalf of 3rd party sellers?
Each marketplace will determine their own course of action. However, this law is extremely similar to the marketplace facilitator laws in both Washington and Pennsylvania, and both Amazon and Etsy have agreed to collect sales tax on behalf of 3rd party sellers in both of those states. Walmart has agreed to collect sales tax on behalf of 3rd party sellers in Washington, but, as of this writing, has not yet agreed to begin collecting in Pennsylvania.
Etsy has recently announced that they will be collecting sales tax on orders to Pennsylvania, Washington & Oklahoma on behalf of sellers. It remains to be seen if Amazon, and other marketplaces will announce that they are collecting Oklahoma sales tax on behalf of 3rd party sellers on the platform. We’ll be following this story, so click the green “Subscribe” button at the bottom of this post for email updates.
Do you have questions or something to say about Oklahoma’s new law? Start the conversation over on our Sales Tax for eCommerce Sellers Facebook Group.