Is Online Sales Tax a Tax Hike?
Oklahoma has just begun requiring merchants to collect sales tax on online purchases. If you make a sale of taxable goods over the internet to a business or an individual in Oklahoma, you must now collect and remit sales tax for that purchase, whether or not your company has nexus in Oklahoma. Alternatively, your company could send a year-end notice to all Oklahoma customers telling them how much they spent with you and reminding them that they have to pay use tax on that amount.
Governor Mary Fallin emphasized in her announcement of this that it is not a sales tax increase. Is that true?
For consumers, probably not. The governor pointed out that consumers, including businesses buying taxable goods, already were supposed to pay those taxes. They’re supposed to list them on their income tax returns, figure them up, and pay them along with their income taxes. Since only 4% of Oklahomans followed this rule, they may end up paying more in sales and use taxes than they did before, but not more than they should have been paying.
The object is to increase revenues for Oklahoma, and also to take away the advantage out-of-state companies had when they didn’t have to charge sales tax. A shopper who bought a $10.00 item in Oklahoma City ended up paying $10.84; if they bought the same items online without paying sales tax, their total would be $10.00, not $10.84.
There is some evidence that the savings on sales tax encourages consumers to buy online rather than heading to a local store.
If you’re an Oklahoma retailer, then, you might benefit by having additional sales.
If you’re an Oklahoma business, you might have some added motivation to shop local.
If you’re selling to people in Oklahoma, though, and you’r not in Oklahoma yourself, you now have to collect, file, and remit in Oklahoma as well in all the states in which you have nexus. The costs involved in that may be significant, especially if you lose much of your Oklahoma sales because those shoppers were choosing you in order to avoid sales tax.
If you’ve been shipping some consumer goods to a guy in Broken Arrow, you might choose to track his purchases and send him a letter at the end of the year… or you might choose to drop him from your customer list.
But that option could take as much time and effort as adding Oklahoma to your list of relevant tax jurisdictions.
Instead, consider trying SalesTaxDataLINK, a patented sales tax solution that makes sales tax calculations and filings much easier. One thing you can be sure of with sales tax: there will be changes. We can help you handle them.
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