For Online Sellers: Sales and Income Tax Amnesty Program

The Multistate Tax Commission (MTC) recently unveiled an amnesty program which will allow some online sellers to waive any previous tax liability, including interest and penalties, in states they have a sales tax nexus with. Twenty four states are currently participating in the the MTC National nexus amnesty program, which runs from August 17 – October 17. The program encourages remote sellers to become compliant with state sales tax laws by providing a voluntary disclosure – or amnesty – with the participating states. In turn, the remote sellers that may have had previouis sales tax liability are exempt from paying any back taxes they might owe. The program is a win-win. The states are happy as the online sellers become registered and compliant and will being to collect taxes moving forward, while online sellers will not owe any past due sales tax, interest or penalties.

WHO’S AFFECTED:

Selling Online Sales tax nexus is a legal term that describes the your tax obligation based on the minimum relationship between your business and the states your products are inventoried and ship from. If you sell anything online through marketplaces, like Amazon, eBay, or Etsy to name a few, where products are inventoried and fulfilled on your behalf in states other than where your business resides, you may owe income or sales tax in those states.

If you have already been collecting sales tax in the applicable states, you’re ineligible from participating in the amnesty program, but you may be eligible for income or franchise tax amnesty and visa versa.

MORE DETAILS PLEASE?

Looking for ways to increase their tax revenue, states have been arguing for years that online sellers are not reporting and collecting sales tax on items that are stored and shipped from within their borders. As online marketplaces with fulfillment centers spread across the country continue to gain steam in popularity, states are focusing more on ways to collect what they see as their due.  Amazon sellers who use the Fulfillment by Amazon (FBA) alone owe an estimated $2 billion in uncollected sales tax. That’s a big number.

The states that have partnered with the MTC are creating a unique opportunity to online sellers to gain amnesty, meaning they will waive past tax obligations. In fact, this is only the second time in U.S. history that states have agreed to waive back taxes of this magnitude. Typically amnesty programs similar to this one still require companies to report sales and tax obligations for a 3-4 year back period, and typically the states expect to collect the taxes owed the them. This program however, only applies to prospective sales moving past 2017.

Additionally, companies can pick and choose which states they want to participate in.

WHAT STATES ARE PARTICIPATING:

The following states are participating in the amnesty program:

  • Alabama
  • Arkansas
  • Colorado 
  • Connecticut
  • District of Columbia
  • Florida
  • Idaho
  • Iowa
  • Kansas
  • Kentucky
  • Louisiana
  • Massachusetts
  • Minnesota
  • Missouri
  • Nebraska 
  • New Jersey
  • North Carolina
  • Oklahoma
  • South Dakota
  • Tennessee
  • Texas
  • Utah
  • Vermont
  • Wisconsin

More states may join as well. For the official list see MTC’s website.

YOU NEED TO ACT FAST:

The amnesty program is only running from August 17, 2017 through October 17, 2017.

HOW TO PARTICIPATE:

This is a unique opportunity for your business to become compliant with minimal consequences. If you believe you may have sales tax nexus in various states and past tax obligations, visit the MTC Nexus Program Website for more details.

 

Gail Randolph

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