2017 MTC Sales Tax Amnesty Program

mtc

SALES TAX AMNESTY ANNOUNCED FOR 23 STATES, EFFECTIVE August 17-October 17, 2017 ONLY

At our March 2017 PROSPER Show, we welcomed speaker Richard Cram, the Director of the National Nexus Program for the Multi-State Tax Commission, a national organization that coordinates sales tax teams across multiple states. Richard spoke about the sales tax implications of being an FBA seller, having one’s products distributed by Amazon across potentially dozens of states. The placement of product in these states most likely creates a responsibility for FBA sellers to collect and remit sales taxes for product sales in those states.

For Amazon sellers that have not addressed potential sales tax liabilities to date, it can be challenging to evaluate whether to file a Voluntary Disclosure (indicating that the seller has not been paying sales taxes properly, but wants to rectify the problem) OR continue with status quo of not addressing potential sales tax liabilities, in hopes of not be identified or audited by specific states.

The Multistate Tax Commission National Nexus Program is offering a special limited-time voluntary disclosure initiative (described below), in which the following states are participating:

  • Alabama
  • Arkansas
  • Colorado [1]
  • Connecticut*
  • District of Columbia[2]
  • Florida*
  • Idaho
  • Iowa
  • Kansas*
  • Kentucky*
  • Louisiana
  • Massachusetts [3]
  • Minnesota [4]
  • Missouri
  • Nebraska [5]
  • North Carolina
  • New Jersey*
  • Oklahoma
  • South Dakota [6]
  • Tennessee*
  • Texas*
  • Utah
  • Vermont
  • Wisconsin* [7]

Current states containing Amazon fulfillment warehouses, as of August 14, 2017*

The States listed above will consider applications for voluntary disclosure received by Multistate Tax Commission (MTC) staff during the time period August 17, 2017 through October 17, 2017 from taxpayers meeting the following eligibility criteria:

1. The taxpayer has not yet registered with the state taxing authority, filed returns with such state for the tax type that the taxpayer is seeking voluntary disclosure relief for (sales/use tax, income/franchise tax, or both), made payments of such taxes to, or had any other prior contact with the state concerning liability or potential liability for such tax type.

2. The taxpayer is an online marketplace seller using a marketplace provider/facilitator (such as the Amazon FBA program or similar platform or program) to facilitate retail sales into the state and has no location, property, employees, or agents in the state, except for the online marketplace seller’s inventory stored in a third-party warehouse or fulfillment center located in the state or other nexus-creating activities of the marketplace provider/facilitator on behalf of the online marketplace seller in the state. A “marketplace provider/facilitator” is a person who facilitates a retail sale by an online marketplace seller by (1) listing or advertising for sale by the online marketplace seller on a website, tangible personal property, services, or digital goods that are subject to sales/use tax; (2) either directly or indirectly through agreements or arrangements with third parties collecting payment from the customer and transmitting that payment to the online marketplace seller; and provides fulfillment services to the online marketplace seller.

3. The taxpayer has timely applied electronically (using either the online application provided on the MTC website at www.mtc.gov or MTC pdf application form available on the MTC website and emailed to MTC staff at email address nexus@mtc.gov) to the state for voluntary disclosure relief through the MTC Multistate Voluntary Disclosure Program (MVDP), in accordance with the process set forth at http://www.mtc.gov/Nexus-Program/Online-Marketplace-Seller-Initiative. The taxpayer will need to state in the application that the taxpayer is applying for voluntary disclosure relief under this initiative and provide complete and accurate disclosure of the information requested, which will be used to establish eligibility.

Note: The application form requests that the applicant provide an estimate of back tax liability to the state for the prior 4 years and contains the statement: “National Nexus Program staff will not process an application when the good-faith estimate for all tax-types for the look-back period is less than $500 in this state.” Please be advised that applications received under this special time-limited online marketplace seller voluntary disclosure initiative will be processed, even when estimated back tax liability is less than $500. Also, response times permitted in this initiative may be shorter than those provided in the MTC Procedures for Voluntary Disclosure, in order to ensure that the taxpayer timely complies with Paragraph 4 below.

4. The taxpayer is seeking relief from any past due sales/use tax, including interest and penalties, and if applicable, income/franchise tax liability, including interest and penalties, in connection with its online retail sales activity in the state, except for sales/use tax collected but not remitted, with the taxpayer agreeing to register as a seller or retailer with the state and timely collect, report and remit sales/use tax and file returns on all taxable retail sales to customers in the state prospectively as of the effective date (not later than December 1, 2017—taxpayers are encouraged to commence collection and remittance of sales/use tax prior to that date) of the voluntary disclosure agreement. If subject to income/franchise tax, the taxpayer further agrees to timely file income/franchise returns and pay such taxes due, commencing with the tax year including the effective date (not later than December 1, 2017) of the voluntary disclosure agreement. If the taxpayer has any collected but unremitted sales/use tax, then the taxpayer agrees to remit such tax to the state, including penalties and interest.

As provided in the MTC Procedures of Multistate Voluntary Disclosure, a taxpayer can apply to a state for voluntary disclosure anonymously and will not be required to disclose its identity to the state until the taxpayer registers with the state and the voluntary disclosure agreement is executed. The taxpayer may choose which state and which tax type (sales/use tax, income/franchise tax or both) to seek voluntary disclosure relief for. The taxpayer can also withdraw the application for voluntary disclosure with any state at any time prior to execution of the voluntary disclosure agreement.

Normally, when a taxpayer applies for voluntary disclosure relief with states through the MTC MVDP, the taxpayer will be required to file returns and pay back tax liability, plus interest, for the lookback period that the state uses, which is generally the prior three to four years or more, depending on the state’s law or policy. The state will then waive tax liability, interest and penalties for the time period prior to the lookback period. Under the special time-limited initiative described above, for taxpayers meeting the above criteria, the states identified above (unless otherwise indicated) will agree to waive sales/use and income/franchise back tax liability, including penalties and interest, for prior tax periods, without regard to any lookback period, provided the taxpayer registers as a seller or retailer to collect, report and remit sales/use tax and commences to file sales/use tax returns and remit sales/use tax as of the effective date (not later than December 1, 2017) set forth in the voluntary disclosure agreement, and if the taxpayer is subject to income/franchise tax, the taxpayer commences filing income/franchise tax returns and paying tax due, commencing with the tax year that includes the effective date of the voluntary disclosure agreement (not later than December 1, 2017).

Note: See footnotes for Wisconsin and Colorado. Wisconsin will require payment of back tax liability and interest for the following lookback periods: for sale/use tax, commencing January 1, 2015; for income/franchise tax, including tax years 2015 and 2016. The lookback period will be limited to prior years during which the marketplace seller had nexus. Colorado will provide back tax liability relief for sales/use tax, but will require payment of back tax liability and interest for a 4-year lookback period for income/franchise tax.

[1] Colorado will waive any back tax liability for uncollected sales/use tax. However, Colorado will not waive back tax liability for income tax beyond its normal four-year lookback period. Colorado notes that it already has a small seller income tax nexus exception for sales less than $500,000 into the state.

[2] D.C.’s standard lookback period is 3 years for sales/use and income/franchise tax. D.C. will consider granting shorter or no lookback period for applications received under this initiative.

[3] Massachusetts requires compliance with its standard 3-year lookback period; this lookback period in a particular case may be less than 3 years, depending on when vendor nexus was created

[4] Minnesota’s customary lookback period is 3 years for sales/use tax and 4 years (3 look-back years and 1 current year) for income/franchise tax. Minnesota will grant shorter lookback periods to the time when the marketplace seller created nexus.

[5] Nebraska will consider waiving back tax liability for uncollected sales/use tax and income tax.

[6] South Dakota imposes sales/use tax but does not impose income tax.

[7] Wisconsin will require payment of  back tax and interest for a lookback period commencing January 1, 2015 for sales/use tax, and including the prior tax years of 2015 and 2016 for income/franchise tax.

 

The States participating in this special time-limited voluntary disclosure initiative have agreed not to disclose to other taxing jurisdictions the identity of any taxpayer entering into a voluntary disclosure agreement under this special time-limited initiative, except as required by law, pursuant to a court order, or in response to an inter-government exchange of information agreement in which the requesting entity provides the taxpayer’s name and taxpayer identification number. Blanket requests from other jurisdictions for the identity of such taxpayers will not be honored.

 

On August 9th, we hosted a webinar with MTC’s Richard Cram to discuss this program. Here is the link to the recording of that webinar: https://drive.google.com/file/d/0B0CSNsrXbUucSkhEWElNbVBIams/view?usp=sharing

 

RESOURCES TO HELP YOU WITH SALES TAX COMPLIANCE
(click on companies for links to more details)

1. GETTING REGISTERED IN SPECIFIC STATES

Peisner Johnson

Sales Tax System

Yetter Tax/Sales Tax Institute

State Tax Advisors

Ampersand Accounting

States Sales Tax

Baker Newman Noyes

 

2. REMITTING YOUR SALES TAXES

Avalara.com

Taxify.co

Taxjar.com

VertexSMB.com

States Sales Tax

 

3. TAX ADVISORY / CONSULTING ADVICE around other states not in the Amnesty program, or other general tax advice regarding Amazon channel

Peisner Johnson

Catching Clouds

The Amazon Accountants

Ampersand Accounting

Yetter Tax/Sales Tax Institute

State Tax Advisors

States Sales Tax

Baker Newman Noyes

 

4. REPORTING ON YOUR HISTORICAL SALES TAX PRESENCES (so you can understand where you likely have sales tax nexus at this point)

Wherestock

Taxjar.com

Ampersand Accounting

States Sales Tax

Baker Newman Noyes

Avalara.com

 

5. SOFTWARE TO PULL IN YOUR AMAZON SALES DATA INTO TAX SOFTWARE (so you can calculate your sales tax responsibility)

A2X Accounting

Taxjar.com

Avalara.com

 

Please note some of these firms above may offer additional tax services. 

 

Keep in mind: If you ask Amazon to collect sales tax for you, Amazon will do so and charge you a fee of 2.9% of the sales tax collected. To initiate this, go to Seller Central, Settings, Tax Settings, fill out the tax details by state where you want Amazon to collect taxes for you. Please remember that REMITTING sales taxes is exclusively the responsibility of the seller, not Amazon’s responsibility.