Oklahoma looks to tax remote sales via economic nexus

Update 5.15.2019: Senate Bill 513, sent to governor on May 14, 2019, requires remote sellers to collect Oklahoma sales tax if they have annual sales in the state in excess of $100,000. However, it keeps the existing $10,000 threshold for marketplace facilitators and allows marketplace facilitators to opt out of collection if they comply with use tax notice and reporting requirements. For remote sellers that sell on marketplaces, marketplace sales may be excluded when determining the economic nexus threshold.

Oklahoma is one of many states looking to increase sales tax revenue by taxing remote sales. Like many of its counterparts, Oklahoma is taking a multipronged approach to achieving its goal. It's imposed collection or reporting requirements on many remote businesses since July 1, 2018, and the legislature is currently considering two sales tax economic nexus bills.

Existing law gives marketplace facilitators, referrers, and remote sellers a choice

Current Oklahoma law mandates that remote sellers, marketplace facilitators, and referrers with at least $10,000 in aggregate sales of tangible personal property for delivery in Oklahoma either collect and remit Oklahoma sales tax, or comply with notice and reporting requirements for non-collecting sellers.

For marketplace facilitators, the notice and reporting requirements or collection obligation apply to all sales, their own and those made on behalf of marketplace sellers. Learn more about Oklahoma’s current remote sales tax law.

Measures would eliminate the choice for certain remote sellers

House Bill 2033 and House Bill 2352 both seek to impose a sales tax collection obligation on remote sellers with at least $100,000 in aggregate sales of taxable tangible personal property delivered to locations in Oklahoma during the preceding calendar year. The tax collection obligation would apply to the next succeeding fiscal year.

Sales by a remote seller through a marketplace forum or a referrer’s platform would be excluded from the $100,000 threshold when the marketplace facilitator or referrer collects and remits tax on the seller’s behalf.

In essence, remote sellers that meet the $100,000 threshold would no longer be allowed to opt out of sales tax collection and remittance by choosing to comply with non-collecting seller use tax notice and reporting requirements. If either measure is adopted, the new requirement would take effect July 1, 2019.

Other states also expanding remote seller sales tax laws

Oklahoma law currently allows remote sellers to opt out of collecting sales tax by complying with notice and reporting requirements because states only recently won the right to tax remote sales.

On June 21, 2018, the Supreme Court of the United States overruled a long-standing physical presence rule in South Dakota v. Wayfair, Inc. The court found a remote business’s economic and virtual contacts with a state to be a sufficient basis for sales tax nexus, or a tax collection obligation.

Since the ruling, nearly all states with a sales tax have worked to impose new collection and reporting requirements on remote sellers. Approximately 35 states have already adopted economic nexus laws, including three of the big five: California, New York, and Texas.

But like Oklahoma, many states are also looking to amend or add to existing laws. For example:

• Hawaii would require certain marketplace facilitators to collect tax on behalf of third-party sellers (Wyoming passed a new marketplace sales tax law on February 12, 2019)
• Georgia and North Dakota would simplify their economic nexus laws
• Massachusetts, Missouri, and Virginia would establish economic nexus for remote sellers and require certain marketplace facilitators to collect tax on behalf of third-party sellers

Learn more about states’ remote sales tax laws at the Avalara resource page on South Dakota v. Wayfair, Inc.