Updated Feb. 2
Online retail giant Amazon will start collecting sales tax from Oklahoma customers in March – a move that will send tens of millions of dollars to state and local governments.
Gov. Mary Fallin on Thursday confirmed the arrangement, first reported by Oklahoma Watch the day before, and said collections will begin on March 1. State, city, town and county governments will receive their first extra revenues as early as May. With the change, Oklahoma will become the 40th state where the Seattle-based e-commerce company collects and remits sales and use taxes.
However, the additional tax revenue will not impact Oklahoma’s current fiscal year budget or the $870 million projected shortfall for next year’s budget. Fallin said that’s because budget officials included the anticipated sales tax money in the state’s revenue estimates while secret negotiations with Amazon were underway.
But Oklahoma’s current budget woes would be even more dire if the agreement with Amazon didn’t go through. And the state can count on a new steady revenue stream for years to come.
“The good news is that we are receiving tens of million of more dollars,” Fallin said. “And the cities, towns and counties will see a bump of collections immediately when it is collected and dispersed in the April and May timeframe.”
Fallin confirmed the arrangement Thursday during the annual Associated Press Legislative Forum.
The state has been in confidential talks with Amazon since the passage of last year’s Retail Protection Act.
That measure requires online retailers to either start voluntarily collecting the sales tax or notify their customers of the existing law, seldom followed, stating that it is the customer’s responsibility to pay the tax when a merchant doesn’t have a physical presence in the state.
The idea behind the law is that it would be easier for the companies to begin collecting and remitting the tax to the state rather than notify customers. It also includes an incentive that retailers that voluntarily collect the taxes by May 1 would be protected from paying previous uncollected sales and use taxes owed to the state.
Oklahoma Tax Commission spokeswoman Paula Ross said the agency has notified the top 500 online retailers of the new law and has been talking with a number of firms, including Amazon.
Ross said the state doesn’t provide estimates for how much revenue the state is missing out on annually from specific companies. But a seven-year-old report, which hasn’t been updated, pegged the total at nearly $300 million if all out-of-state internet sales and use tax revenues were collected each year.
She said the amount of new revenue the state could see if all major online retailers came on board is likely lower now because many smaller retailers are already voluntarily collecting the tax. But she said the total gain in funds the state is currently foregoing will still likely be in the “hundreds of millions” of dollars.
Oklahoma’s cites, towns and counties, which levy their own sales and use taxes, also will benefit from the move. Ross said, as a whole, they can expect to receive tens of millions in extra funds each year.
Local leaders joined in applauding the news Thursday.
“Given the heavy reliance of Oklahoma municipalities on sales tax, this is remarkable news,” said Tulsa Mayor G.T. Bynum in a written statement. “The long-term impact of this announcement in Tulsa will be a city with safer neighborhoods and smoother streets.”
Bynum also emphasized that “this is not a new tax, but rather means Amazon will collect what Oklahoma customers should have been paying as a use tax every year but too often were not.”
A USA Today report estimates Amazon accounts for 20 to 30 percent of online retail sales, making it easily the largest e-commerce company in the country.
But state officials and lawmakers say they plan to continue to target other retailers that have yet to voluntarily collect sales and use taxes from Oklahoma customers.
Sen. David Holt, R-Oklahoma City, is sponsoring a bill for the upcoming session that would add more reporting regulations and potential penalties for companies that fail to collect the taxes.
His proposal would require the out-of-state retailers to file an annual statement with the Oklahoma Tax Commission listing purchases from all their Oklahoma customers. Failure to file this would bring a penalty of $10 per customer.
“Amazon is obviously the biggest fish, but there are others out there,” Holt said.
Fallin also called on Congress to pass a federal law that would create a national standard for out-of-state retailers to collect sales and use tax and remit to the states.