Oklahoma Enacts New Rules Regarding Use Tax on Mail-Order Sales

On August 26, 2010, the Oklahoma Tax Commission enacted emergency regulations under state law HB 2359, a new law that includes sales tax obligations for out-of-state retailers, which went into effect on July 1, 2010. The regulations must now be approved by the governor of Oklahoma (to whom they were submitted on August 26th) before they go into effect. The Direct Marketing Association, which "worked with the Commission to communicate concerns with certain provisions and to explain compliance problems," announced the enactment of the regulations, and plans to post them on its Web site when they are available.

As with Colorado, Oklahoma is seeking to increase collection of use taxes, similar to sales taxes but levied on purchases shipped from out-of-state retailers to Oklahoma residents. In Oklahoma's case, the approach includes requiring out-of-state retailers to provide "readily visible" written notice to Oklahoma consumers on the retailer's website or catalog and invoices that those consumers owe use taxes on their purchases, and prohibiting advertising that no taxes are due for the purchase. (Online auction sites are exempt only from the invoice requirement.) The law also establishes a "Retailer Compliance Initiative" designed to encourage and assist out-of-state retailers in voluntarily collecting the use tax directly.

According to the DMA, key provisions of the new emergency rules in Oklahoma include:

  • The website and/or catalog notice must contain these five provisions --
    • the non-collecting retailer (a retailer that does not collect and remit Oklahoma sales and use tax) is not required and does not collect Oklahoma sales or use tax;
    • the purchase is subject to Oklahoma sales and use tax unless specifically exempt;
    • the purchase is not exempt merely because it was conducted over the Internet or remotely;
    • Oklahoma purchasers must report and then pay tax on purchases that were not taxed (additional information about the specific forms is also required); and
    • consumers can find the necessary forms and instructions at the Oklahoma Tax Commission website.
  • For websites, the required notice must occur "on a page necessary to facilitating the applicable transaction," although a specific 21-word link to the complete notice can be included if it refers the consumer to the full required notice.
  • Catalogs have a similar requirement except the full notice or reference to the full notice (using the 21-word link language plus the appropriate page number where the notice can be found) must be included on the order form.
  • The "invoice" notice must be on the electronic order confirmation sent to the consumer. This notice can be done via a link as described above, unless no electronic order confirmation is provided, in which case the full text of the notice must appear "on the purchase order, bill, receipt, sales slip, order form, or packing statement."
  • For off-line catalog purchases, the full text of the notice must appear "on the purchase order, bill, receipt, sales slip, order form, or packing statement."
  • An exception for Internet purchases is provided if the retailer chooses to place the notice on the "check out" page of a website. Placing the notice on the "check out page" would then fulfill both the website and invoice notice requirements.
  • A provision in the rules allows for consolidated notices if the retailer is required to provide a similar notice for another state. (Note: In reality the specificity of the Oklahoma notice would likely make crafting a generic notice impractical, if not impossible, since the Oklahoma notice requires using "Oklahoma" in two places.)
  • Retailers are prohibited from "displaying or implying" that no tax is due on any Oklahoma purchase unless, the sale is actually exempt or the notice accompanies each such display of no tax being due. The rules provide the example that displaying "zero" or "0.00" next to a line designated as "Sales tax" would display or imply that no tax is due.
  • The Oklahoma law and rules apply to online auction websites.
  • De minimis retailers and online auction websites are defined as having less than $100,000 in total gross sales in Oklahoma in the previous year and a reasonable expectation of the same in the current year.
  • The effective date of the rules is set at October 1, 2010.
  • There are no enforcement provisions in the emergency rules. However, this may change with the permanent rules.

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