Oklahoma will soon join a growing list of states that collect sales taxes on purchases made through online retail giant Amazon, Gov. Mary Fallin announced Thursday, touting the agreement as a "big accomplishment" for the financially strapped state.
Fallin said Seattle-based Amazon will begin voluntarily collecting state and local sales taxes on March 1 and will remit them starting in April. Local governments that are heavily dependent on sales tax revenue should begin receiving the collections in May, Fallin said.
"That will really help our state, but in particular it will make a huge difference to our cities and our towns and our counties who will now start receiving that sales tax payment," the governor said.
State officials estimate the state has lost about $300 million in sales tax collections from online shopping. Fallin estimated Oklahoma would raise tens of millions of dollars in new revenue through the agreement with Amazon but said the exact amount was unclear.
Fallin said the revenue will not affect this year's current $870 million budget hole because the state's tax commission already projected some increased collections as a result of its negotiations with Amazon.
Oklahoma collects a 4.5 percent sales tax on purchases and sales tax rates in counties, cities and towns average 4.36 percent, according to a report released Tuesday by the Tax Foundation, an independent, nonprofit tax policy institute.
Amazon has been slow in collecting sales taxes in small and sparsely populated states where it doesn't have any distribution centers or corporate offices. The company has historically relied on a 1992 decision that bans states from forcing out-of-state retailers to collect taxes if they don't have a physical presence in the state.
But just last year the nation's highest court rejected a challenge to a Colorado law that requires online sellers to notify customers about how much they owe in taxes. Colorado officials had estimated they were missing out on as much as $172.7 million a year.
Amazon customers in at least 10 states will begin paying sales taxes on their website purchases for the first time this winter. Tax collection began Wednesday in Mississippi, Missouri, Rhode Island, South Dakota and Vermont. It started last month in Louisiana, Iowa, Nebraska and Utah, and begins in Wyoming on March 1.
On Wednesday, lawmakers in Arkansas advanced a plan to require out-of-state companies with no physical presence in the state to collect the tax if they sell more than $100,000 worth of products or make at least 200 transactions. Amazon does not have a distribution center or office.
The agreement means that consumers will have to pay more for their orders if they aren't already submitting use taxes when they purchase something sales-tax free. The company's website says purchases shipped to over 30 states are subject to sales taxes.
Fallin announced Oklahoma's agreement with Amazon during a legislative forum sponsored by The Associated Press. She said negotiations have been underway between the state and Amazon for a year and urged Congress to address online sales tax collections for state and local governments.
"This issue is really hurting our cities and our towns across the state," she said.