Global Tax Insights
Online Sellers: Tax Relief Opportunity for You!September 25, 2017
If you’re an online seller with nexus in multiple states, you may have sales tax obligations that you might be ignoring. But...all hope is not lost. You could qualify for a special tax amnesty program.
Are you an online seller with nexus in more than one state? If you participate in the Fulfillment by Amazon or FBA program, you might be eligible for a special sales tax amnesty program. The Multistate Tax Commission has contacted a number of states and have put together a tax amnesty program which will allow FBA sellers to avoid back taxes.
The issue at hand
“FBA” sellers are third-party businesses that use Amazon (or other third party marketplace) to fulfill orders on their behalf, hence their inventory is stored in warehouses owned by Amazon. Having a physical presence in a state, even through a third-party marketplace, triggers nexus, which is the obligation businesses have to collect sales and use tax on behalf of the state. States have seen a huge drop in tax revenue from marketplace sales because many businesses neglect to collect these taxes.
More about the tax amnesty program
As a result of this, states are ramping up efforts to tax sales by third-party sellers. As one example, Virginia has enacted a law that stipulates that storing inventory in the state creates sufficient nexus to require out of state businesses to collect VA sales and use taxes.
However, many businesses who have neglected their sales and use tax obligations in the past have a dilemma—do they register to pay tax and put their business at risk for back taxes, penalties and headaches? Or do they continue ignoring their tax obligation and pray that a state never comes knocking?
This is where the tax amnesty program can help....
From August 17th to October 17th, the Multistate Tax Commission, MTC, will give businesses the chance to register with the MTC through its Voluntary Disclosure Amnesty Program, which will offer sellers amnesty for back taxes and penalties.
What makes this program unique is that some of the participating states are willing to waive all tax collection requirements for periods before 12/1/2017.
What states are participating?
Currently there are 25 states that have agreed to participate: Alabama, Arkansas, Connecticut, Colorado, District of Columbia, Florida, Iowa, Idaho, Kansas, Kentucky, Louisiana, Massachusetts, Minnesota, Missouri, Nebraska, New Jersey, North Carolina, Oklahoma, South Dakota, Tennessee, Texas, Utah, Vermont and Wisconsin. Additional states are expected to announce their participation as well.
Some key things to note:
- The relief is most likely limited to taxpayers whose only contact with the state is being an FBA seller.
- You’re not eligible if a state has previously contacted you regarding your sales tax obligations.
- The waiver would most likely not apply if the seller has other nexus-creating activities in the state
How to register
Step 1- Fill out a Voluntary Disclosure form through the MTC. You will have to indicate which specific states (specified above) you want to pursue through the program.
Step 2- The MTC will anonymously distribute the form to the states specified by the FBA seller.
Keep in mind that the amnesty program is still a work in progress, and details are subject to change—we’ll keep you posted on any revisions or updates.
Questions? Reach out to out Tax Services Team today.