Third-party online retailers must collect and remit Oklahoma sales tax under marketplace sales legislation signed by Oklahoma Gov. Mary Fallin.
Collection Required by Marketplace Facilitators
The bill requires a “marketplace facilitator” to collect the state’s sales or use tax on sales by third-party sellers in the marketplace. A “marketplace facilitator” facilitates the retail sale of tangible personal property if it or an “affiliated person:”
- lists or advertises property for retail sale in a “forum;” and
- collects the purchaser’s payment and sends it to the seller.
The payment is collect directly or indirectly, through agreements or arrangements with third parties.
Persons Affiliated with a Marketplace Facilitator
An “affiliated person” is a person who, with respect to another:
- 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 also affiliated with each other, holds a direct or indirect ownership interest of more than 5% in the related person.
Forum is Where Retail Sales Occur
A “forum” is a place where sales at retail occur, whether physical or electronic.
Collect Sales Tax or Meet Notice Requirements
Under the new law, a marketplace facilitator, “remote seller,” or “referrer” may have to:
- file an election with the Tax Commission to collect and remit sales and use tax and obtain a sales tax permit; or
- comply with notice and reporting requirements.
The law imposes the collection or notice requirements if seller had at least $10,000 in Oklahoma sales in the prior 12 months.
Sellers must meet either requirement by July 1, 2018, and by June 1 of each calendar year starting in 2019. Failure to make a required election is considered an election to comply with the notice and reporting requirements. Further An election to comply with the notice and reporting requirements can be changed.
Certain circumstances applicable to marketplace facilitators and referrers affect whether this election must be made. Elections made on or before July 1, 2018, are effective for the 2018-19 fiscal year.
“Remote Seller” Subject to Requirements
A “remote seller” is a person who:
- is not a marketplace facilitator, marketplace seller, or referrer;
- does not have a place of business in Oklahoma; and
- sells taxable tpp at retail through a forum.
“Remote seller” excludes certain employment situations.
“Referrer” Subject to Requirements
A “referrer” is the person who, under an agreement or arrangement with a remote seller or “marketplace seller,”
- 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; and
- does not collect a receipt from the purchaser.
“Referrer” can include vendors but excludes those engaged in the business of newspaper printing or publishing. It also excludes those who:
- provide Internet advertising services, and
- do not provide the marketplace seller’s or remote seller’s shipping terms or advertise whether they collect tax.
Notice requirements apply to remote sellers, marketplace facilitators, and referrers not electing to collect tax and obtain sales tax permits. Such remote sellers and marketplace facilitators must post a conspicuous tax notice on their forums. It must alert potential purchasers of tpp for Oklahoma delivery that:
- sales or use tax may be due on the purchase and delivery of the tpp,
- Oklahoma requires the purchaser to file a return if use tax is due, and
- the notice is required by 68 O.S. §1393.
Notice on Invoices
They also must provide a prominent written notice to each purchaser on invoice documents at the time of sale that includes:
- a statement that sales or use tax is not being collected on the purchase,
- a statement that the purchaser may be required to remit use tax directly to the OTC, and
- instructions for obtaining more information from the OTC on whether and how to remit use tax.
Notice on Sales Platforms
Similarly, referrers not electing to collect tax and obtain sales tax permits must also post a conspicuous notice on their platforms. It must alert potential purchasers of property for Oklahoma delivery:
- that sales or use tax may be due on the purchase and delivery;
- that Oklahoma requires them to file a return if use tax is due and not collected;
- that the person to whom they are being referred might not collect and remit tax on the transaction;
- that if the person does not collect tax on a later purchase, the person may be required to provide them and the OTC information about the purchaser’s potential use tax liability;
- that the notice is required by 68 O.S. §1393; and
- of instructions for obtaining more information from the OTC on whether and how to remit use tax.
The notice can be a pop-up box or other notification appearing when the referrer transfers a purchaser to a person to complete the sale.
Remote sellers and marketplace facilitators required to make the above election who do not elect to collect and remit tax have a reporting obligation. By January 31 each year, they must provide certain purchasers a written report. Purchasers required to receive the report are those required to receive the above notice on invoice documents in the preceding calendar year. Referrers required to make the election who do not elect to collect and remit tax must file a similar report with the OTC. The OTC will provide forms for both reports and post them on its website.
If a remote seller, marketplace facilitator, or referrer elects to comply with the notice and reporting requirements and fails, penalties are the lesser of:
- $20,000, or
- 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. The penalty can apply even when the remote seller, marketplace facilitator, or referrer is deemed to have elected to comply with the notice and reporting requirements.
For five years after this penalty provision takes effect, the commission can abate or reduce the penalty or interest due to hardship or good cause.
A purchaser has a right to seek a tax refund under other Oklahoma sales tax provisions. A class action cannot be filed against a marketplace facilitator or referrer on behalf of purchasers for a refund of taxes paid under these marketplace provisions.
The bill can be viewed at http://webserver1.lsb.state.ok.us/cf_pdf/2017-18%20ENR/hB/HB1019XX%20ENR.PDF.
H.B. 1019, Laws 2018, Second Extraordinary Session, effective April 10, 2018, and applicable as noted