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The Multistate Tax Commission opened a sales/use tax and income/franchise tax amnesty program for online marketplace sellers during the fall of 2017. Online marketplace sellers responded and a total of 852 of them applied to participate, overwhelming the MTC office that only deals with about 100 taxpayers per year.

Originally, the MTC received all the taxpayer’s necessary documentation before forwarding it to the state. Given the volume of applicants, the committee agreed to expedite the process by allowing taxpayers to send final voluntary disclosure agreements, tax registration forms, and other documents directly to the states. This procedural change only applies to sellers who are still waiting to receive state-signed voluntary disclosure agreements. The MTC will inform sellers if they have the option to send documents directly to the states.

For the previous four-year period, thirty applicants reported more than $1 million in back tax liability. Around a quarter of all applicants reported at least $100,000 in back tax liability.

Although the MTC program is closed, taxpayers who believe they have a liability should consider state offered amnesty programs or a voluntary disclosure.  Some states may be willing to negotiate with online sellers.  We are working with some states to negotiate more favorable terms. If you are interested, contact us.
 

(01/29/2018)

The Multistate Tax Commission (MTC) has announced a sales/use tax and income/franchise tax amnesty program for online sellers that will run from August 17 to November 1, 2017 (previously October 17, 2017). Qualified online sellers with potential tax liability may be able to use the MTC's voluntary disclosure agreement (VDA) to negotiate a settlement during the amnesty period if they meet certain eligibility requirements. Taxpayers that have not been contacted by any of the states participating in the amnesty program will be able to apply to start remitting sales tax on future sales without penalty or liability for unpaid, prior accumulated sales tax in the participating states. 25 MTC member states have agreed to participate in the amnesty program. The participating states include: 

 

  • Alabama
  • Arkansas
  • Colorado (sales/use tax only)
  • Connecticut
  • District of Columbia (may not waive all prior periods)
  • Florida
  • Idaho
  • Iowa
  • Kansas
  • Kentucky
  • Louisiana
  • Massachusetts (special provisions apply)
  • Minnesota (special provisions apply)
  • Missouri
  • Nebraska (may not waive all prior periods)
  • New Jersey
  • North Carolina
  • Oklahoma
  • Rhode Island
  • South Dakota
  • Tennessee
  • Texas 
  • Utah
  • Vermont
  • 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)

 

Some of the additional states may require a limited look-back period for prior tax liabilities. Sellers who wish to participate in the program will need to file the voluntary disclosure program paperwork during the program dates. The MTC will route the paperwork for each participating state for which the seller is seeking amnesty protection. For more details visit the MTC website.

 

UPDATE: The Multistate Tax Commission's online seller amnesty program is now over. If you didn't take advantage of this program but realize you need to evaluate your activities, you can contact us here.

(11/07/2017)

On June 12, 2017, Rep. Jim Sensenbrenner (R-WI) and House Judiciary Chairman Bob Goodlatte (R-VA) introduced the No Regulation Without Representation Act of 2017. A previous version of this bill had been introduced in 2016 and failed to pass. Under the proposed bill, a State may tax or regulate a person’s activity in interstate commerce only when such person is physically present in the State during the period in which the tax or regulation is imposed. Under the proposed bill, the physical presencerequirement would apply to sales and use taxand net income and other business activities taxes, as well as the states’ ability to regulateinterstate commerce. “Physical presence” in a state includes:

 

  • maintaining a commercial or legal domicile in the state;
  • owning, holding a leasehold interest in, or maintaining real property such as an office, retail store, warehouse, distribution center, manufacturing operation, or assembly facility in the state;
  • leasing or owning tangible personal property (other than computer software) of more than de minimis value in the state;
  • having one or more employees, agents or independent contractors present in the state who provide on-site design, installation, or repair services on behalf of the remote seller;
  • having one or more employees, exclusive agents or exclusive independent contractors present in the state who engage in activities that substantially assist the person to establish or maintain a market in the state; or
  • regularly employing in the state three or more employees for any purpose.

 

“Physical presence” in a state would not include:

 

  • entering into an agreement under which a person, for a commission or other consideration, directly or indirectly refers potential purchasers to a person outside the state, whether by an Internet-based link or platform, Internet Web site or otherwise;
  • any presence in a state for less than 15 days in a taxable year (or a greater number of days if provided by state law);
  • product placement, setup or other services offered in connection with delivery of products by an interstate or in-state carrier or other service provider;
  • Internet advertising services provided by in-state residents which are not exclusively directed towards, or do not solicit exclusively, in-state customers;
  • ownership by a person outside the state of an interest in a limited liability company or similar entity organized or with a physical presence in the state;
  • the furnishing of information to customers or affiliates in such state, or the coverage of events or other gathering of information in such state by such person, or his representative, which information is used or disseminated from a point outside the state; or
  • business activities directly relating to such person's potential or actual purchase of goods or services within the State if the final decision to purchase is made outside the state.

 

In addition, the bill prohibits the imposition or assessment of a sales, use or other similar tax or a reporting requirement unless the purchaser or seller has physical presence in the state.  This would prohibit all the remote seller legislation (click through, affiliate, economic, marketplace and reporting/notification). If enacted, the legislation would apply with respect to calendar quarters beginning on or after January 1, 2018. (No Regulation Without Representation Act of 2017)

(07/12/2017)

Arkansas has amended its use tax refund for partial replacement and repair of certain machinery and equipment. Currently, the amount of tax that is subject to refund is the tax in excess of 4.875%. Moving forward, the amount of tax that is subject to refund is the tax in excess of the following rates: 

 

  • Beginning July 1, 2018, 3.875% 
  • Beginning July 1, 2019, 2.875% 
  • Beginning July 1, 2020, 1.875% 
  • Beginning July 1, 2021, 0.875%

 

Beginning July 1, 2022, purchases qualifying for the tax refund will be 100% exempt. 

 

Taxpayers can claim the refund either through issuance of a direct pay or limited direct pay certificate to suppliers or through a self-refunding process.  This process allows the taxpayer to claim the refund on the monthly sales and use tax return or by filing a refund claim within one year.  No interest will be paid on these refunds.

 

Beginning July 1, 2018, no separate refund claims can be filed.  The refund can only be claimed by offsetting the refund against other sales and use tax owed and filed on the monthly return.  If the amount of the credit exceeds the amount due, a refund will be paid.  No interest will be paid on these refunds.  Returns must be filed electronically to take the credit. (Act 465 (S.B. 362), Laws 2017, effective March 13, 2017)

(05/17/2017)

Leases of equipment by a taxpayer were subject to Arkansas sales tax and short-term rental tax since the taxpayer physically transferred tangible personal property (TPP) to customers at deliverysites and the services rendered by the taxpayer were incidental. The taxpayer leases equipment for special events, is responsible for setting up and taking down the equipment, and remains with the equipment during the event. In Arkansas, if TPP is rented with an operator's services included, the property rental and operator service is a nontaxable service, provided that the service alone would have been exempt from tax. If, TPP alone is rented, sales tax and rental tax apply. The transaction is characterized as a taxable lease of TPP since physical possession passes to the customer at the delivery site and the customer’s intention is to use the equipment. The presence of the taxpayer’s representatives does not convert the lease of equipment into a serviceas the taxpayer’s representative was not required to operate the equipment. The rentals were also subject to short-term rental tax since the equipment was rented in four-hour intervals. The taxpayer was also liable for a failure to file penalty since no evidence was presented by the taxpayer that the failure to filewas due to reasonable cause.(Administrative Decision Nos. 17-198, 17-199, 17-200, Arkansas Department of Finance and Administration, Office of Hearings and Appeals, March 27, 2017)

(05/09/2017)

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