United States

Oklahoma: Affiliate/Attributional Nexus and Use Tax Notification Provisions Enacted

May 23, 2016
From KPMG TaxWatch

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House Bill 2531, which has been signed into law in Oklahoma, makes certain changes to the state’s sales and use tax laws.  Effective November 1, 2016, an out of state vendor is presumed to be “maintaining a place of business” in Oklahoma if another person (other than a common carrier) has substantial nexus in Oklahoma and engages in various activities in the state.  These activities include: selling a similar line of products as the vendor under a similar business name; using trademarks, service marks or trade names in the state that are the same or substantially similar to those used by the vendor; delivering, installing assembling or performing maintenance services for the vendor; allowing the vendor's customers to pick up property sold by the vendor at an office, distribution facility, warehouse, storage place or similar place of business maintained by the person in Oklahoma; or, conducting any other activities in Oklahoma that are significantly associated with the vendor's ability to establish and maintain a market in Oklahoma.  These presumptions may be rebutted by demonstrating that the person's activities in Oklahoma are not significantly associated with the vendor's ability to establish and maintain a market in the state for sales.  House Bill 2531 also eliminates previously-enacted provisions stating that a retailer was deemed to be engaging in the business of selling tangible personal property in Oklahoma if certain conditions were met, including that the retailer had a controlled group member retailer doing business in the state, or the retailer owned an interest in a retailer maintaining a business in the state.

House Bill 2531 also seeks to improve use tax compliance by adopting use tax notification requirements. Specifically, each retailer or vendor making sales of tangible personal property from a place of business outside Oklahoma for use in Oklahoma that is not required to collect use tax must, by February 1 of each year, provide a statement to each Oklahoma customer stating the total sales made to the customer during the preceding calendar year. Model language for the statement is included in the bill; it generally conveys to the purchaser that use tax may be owed on purchased goods and the tax may be reported on the individual income tax return. The statement must not contain any information on the products purchased and may be sent electronically or by first class mail.  Finally, House Bill 2531 updates provisions authorizing an initiative for out-of-state retailers. In general, currently unregistered retailers that register and start collecting prior to May 1, 2017 will not be held liable for any uncollected use taxes. The initiative applies only to retailers in their capacity as such (i.e., retailers may not participate with respect to purchases of goods for their own use). Please contact Brian Culvey at 713-319-3831 with questions on House Bill 2531.

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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.