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Tax News

Oklahoma bill requests out-of-state businesses to collect, report taxes 

Oklahoma residents may receive a new invoice on Feb. 1 for taxes on purchases made online at companies located outside of the state. 

In May 2016, Governor Mary Fallin approved House Bill 2351, also known as the Retail Protection Act. It expands the scope of Oklahoma’s Use Tax to include businesses located outside of the state that sell to residents, such as Amazon. 

Businesses must voluntarily begin collecting taxes or send customers an end-of-year notice on purchases. The purchaser is responsible for paying the taxes. 

However, the law is still difficult to enforce since a 1992 Supreme Court ruling found that retailers, specifically mail-order companies, cannot be forced to collect taxes in a state the business does not reside. 

Lawmakers said the purpose of this new bill is to create consistency in the state tax requirements and to protect “brick and mortar” businesses. 

Representative Chad Caldwell told the Oklahoman that the bill will “level the playing field … (and) removes financial incentive for shoppers to buy outside our state.”

Examples of purchases subject to the law include books, computers, technology, furniture and any consumable. 

Approximately one-third of purchases in Oklahoma occur online. To comply with the Oklahoma law, residents who make more than $1,000 in untaxed online purchases should consider the following tips:  

  1. Maintain a record of online purchases by keeping receipts. 
  2. Determine the state, city and county tax rate based on address and zip code. 
  3. Document taxes paid in other states for the purchases. This reduces taxes owed in Oklahoma taxes. 

The information gathered from these records are needed to fill out Oklahoma Tax Form 511 on page two, line 20 that requires out-of-state reporting out-of-state purchases. 

Previously, state law required Oklahomans to self-report out-of-state online purchases, but it is estimated only four percent, or 55,000 taxpayers, complied in the state.  A 2009 study in Tennessee found e-commerce contributes to a $23 billion deficit in state and local taxes. In Oklahoma, the state loses an estimated $185 million to $225 million in uncollected sales tax revenue annually.  

Oklahoma Tax Commission spokeswoman, Paula Ross, told State Impact, that more individuals are beginning to report their online purchases because they are realizing the communities are impacted by the reduced tax revenue. 

The Oklahoma Tax Commission website provides several tools to calculate owed taxes from online purchases including a locator system for exact tax percentage based on address, zip code, municipality or county. 

Oklahoma also adopted Streamlined Sales Tax, an initiative to create a nationwide system designed to bring uniformity in the system and simplify purchases that occur across state lines. 

U.S. Congress plans to continue examining the Marketplace Fairness Act. The bill, first introduced in 2013, may provide states more authority to tax online purchases if passed in the future. 

The U.S. Supreme court recently denied to hear a challenge against similar bill in Colorado, strengthening states position to enforce the Use Tax laws. 18 other states have passed similar legislation. 

The trend to incorporate online sales tax continues nationwide as states including Oklahoma strive to regain lost revenues. 

If you need help with your tax returns this year and would like us to calculate your online sales tax, please call us at 405-801-2146 or schedule your free consultation!