Ecommerce Tax Education

What The Oklahoma “Retail Protection Act of 2016” Means For Your Business

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The Overview
Oklahoma enacted the “Retail Protection Act of 2016” which took effect on November 1, 2016.
The Takeaway
Affiliations with related parties could cause you to inherit their sales tax collection obligations.
Don’t Forget
Oklahoma is also offering amnesty for out-of-state retailers that should be collecting sales tax. The state will not attempt to collect prior sales tax from those who register by May 1, 2017.

Updated Oklahoma Sales Tax Rules

 

On November 1, 2016, Oklahoma enacted the Retail Protection Act of 2016 which  increases the number of remote sellers who may be obligated to collect and remit their taxes. Oklahoma will follow the lead of other states — such as California, New York, Illinois, and Louisiana — in collecting sales tax from out-of-state businesses that have affiliations with existing Oklahoma businesses if they:

 

  1. Offer similar product lines
  2. Use similar trademarks, service marks or trade names
  3. Have an OK business deliver, install, assemble or perform maintenance services for them
  4. Use an OK business to facilitate delivery of property within the state by allowing their customers to pick up purchases at OK locations
  5. Have the OK business perform other activities that help them establish and maintain a market in the state

For those not currently registered in OK, this new rule means they should review their relationships with Oklahoma companies to determine if they may now be required to charge OK tax.

Amnesty on Unpaid Tax

The bill allows online out-of-state retailers that have not been charging tax to eliminate their audit exposure by voluntarily registering for a sales tax permit by May 1, 2017. This is a good opportunity for those who think they should have been collecting Oklahoma tax to reduce their penalty exposures. However, there are a number of exceptions and provisions, and remote sellers would be well served by discussing the matter with an accountant or other trusted tax advisor. 

 

Required Notification to Buyers

Oklahoma will be collecting sales tax from out-of-state businesses that have affiliations with existing Oklahoma businesses.

Here’s the kicker: Even if remote sellers are not required to charge Oklahoma tax, they will still be required to notify Oklahoma purchasers that they should be voluntarily remitting use tax on their Oklahoma income tax forms. Under the same statute, sellers who do not charge their customers in-state tax will be required to send their Oklahoma customers a notice (by regular mail, e-mail, or other electronic communication) prior to February 1 of each year that specifies how much they spent and gently reminds them of their obligations to self-assess use tax. However, the law also states that sellers should not, under any circumstances, identify or describe the items they purchased. That information is considered confidential.

This new rule is similar — but not identical — to notice provisions that have been popping up across the country, including South Carolina, South Dakota, Kentucky, and Colorado. 

Taxpayers who find these notice provisions too complex or burdensome retain the option of registering with the state. By definition, these requirements do not apply to any taxpayers who charge the proper tax to their customers at the time of sale. By automating sales tax with Taxify you can begin collecting and remitting sales tax in Oklahoma and avoid having to send notices to your customers. 

 

A Changing Regulatory Landscape

 

According to Chuck Maniace, Director of Tax Research at Sovos, “The pace of legal and regulatory change in the world of sales and use tax makes it extremely challenging for retailers — especially internet sellers — to remain compliant. The “tax gap” created by the growth of untaxed remote commerce will continue to compel states to evaluate whether or not they can legally stretch their existing nexus rules to capture more sellers. These businesses can ensure their long-term health and compliance by understanding how these rules might impact them and having processes in place that allow them to quickly comply with changing rules.”

 

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