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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)

Effective for sales and purchases made after June 30, 2017, fiber and conduit used in the transportation of telecommunications or pay television services are exempt in Minnesota. These items are added to the existing exemption for telecommunications or pay television machinery and equipment.  Telecommunications or pay television services machinery and equipment purchased or leased for use directly by a telecommunications or pay television services provider primarily in the provision of telecommunications or pay television services that are ultimately to be sold at retail are exempt, regardless of whether purchased by the owner, a contractor, or a subcontractor. (Ch. 1 (H.F.1 a), First Special Session, Laws 2017)

(06/19/2017)

Effective July 1, 2017, the refundable sales tax exemption for qualified businesses in greater Minnesota cities is expanded to ten years for businesses that invest at least $200,000,000 over a ten-year period. Certification becomes effective the first day of the calendar month immediately following the date that the commissioner informs the business of the award of the benefit. The current exemption period for qualified business is seven years. A qualified business is entitled to a sales tax exemption, up to $5 million (previously $2 million) annually and $40 million (previously $10 million) during the total period of the agreement.  Other requirements include that the business pledges to satisfy the minimum expansion requirements within 3 years of the agreement, the business must increase the number of full-time equivalent employees in greater Minnesota by 2 employees or 10% whichever is greater and that the commission determines that the business would not have expanded its operations in greater Minnesota without the tax incentives available.

 

Applicable retroactively to sales and purchases made after January 1, 2013, and before January 1, 2017, a refundable exemption is enacted for materials and supplies used or consumed in and equipment incorporated into the construction of a retail development consisting of retail space for a grocery store, fueling center, and other retail space by a federally exempt nonprofit economic development corporation, provided that the development is located in a city with no grocery store and the city is at least 20 miles from another city with a grocery store. Tax must have been paid and a refund claim must be filed by December 31, 2017. (Ch. 1 (H.F.1 a), First Special Session, Laws 2017)

(06/19/2017)

Minnesota has enacted a number of sales and use tax nexus amendments, including marketplace nexus and affiliate nexus provisions. The state has amended the definition of "retailer maintaining a place of business in this state" to include a retailer who has storage in Minnesota, employs a Minnesota resident who works from a home office in Minnesota, has a marketplace provider or other third party operating in Minnesota under the retailer’s authority for any purpose, including facilitating and processing sales. A retailer is represented by a marketplace provider in Minnesota if the retailer makes sales in Minnesota facilitated by a marketplace provider that maintains a place of business in Minnesota.

 

”Marketplace provider“ means any person who facilitates a retail sale by a retailer by: 

 

  • listing or advertising for sale by the retailer in any forum, taxable tangible personal property, services, or digital goods that are subject to tax under this chapter; and
  • either directly or indirectly through agreements or arrangements with third parties collecting payment from the customer and transmitting that payment to the retailer regardless of whether the marketplace provider receives compensation or other consideration in exchange for its services. 

 

A retailer with total taxable retail sales to customers in Minnesota of less than $10,000 in the 12-month period ending on the last day of the most recently completed calendar quarter is not required to collect and remit sales tax if it is determined to be a retailer maintaining a place of business in the state solely because it made sales through one or more marketplace providers. This provision does not apply to a retailer that is or was registered to collect sales and use tax in Minnesota.

 

A marketplace provider will be required to collect and remit sales and use taxes for all facilitated sales for a retailer, and will be subject to audit on the retail sales it facilitates unless either: 

 

  • the retailer provides a copy of the retailer's registration to collect sales and use tax in Minnesota to the marketplace provider before the marketplace provider facilitates a sale; or
  • upon inquiry by the marketplace provider or its agent, the commissioner discloses that the retailer is registered to collect sales and use taxes in this state. 

 

A marketplace provider will not be liable for failure to file and collect and remit sales and use taxes if the marketplace provider demonstrates that the error was due to incorrect or insufficient information given to the marketplace provider by the retailer. This does not apply if the marketplace provider and the marketplace retailer are related parties.

 

Nexus is also established if a retailer who is a remote seller has an entity perform duties on its behalf which is considered affiliate nexus.  Common ownership is not required. An entity is considered an affiliate of a retailer for nexus purposes if the entity:

 

  • has the same or a similar business name as the retailer and sells, from a location or locations in Minnesota, taxable tangible personal property, digital goods, or services that are similar to those sold by the retailer;
  • maintains an office, distribution facility, salesroom, warehouse, storage place, or other similar place of business in Minnesota to facilitate the delivery of tangible personal property, digital goods, or services sold by the retailer to its customers in Minnesota;
  • maintains a place of business in Minnesota and uses trademarks, service marks, or trade names in Minnesota that are the same or substantially similar to those used by the retailer, and that use is done with the express or implied consent of the holder of the marks or names;
  • delivers, installs, or assembles tangible personal property in Minnesota, or performs maintenance or repair services on tangible personal property in Minnesota, for tangible personal property sold by the retailer;
  • facilitates the delivery of tangible personal property to customers of the retailer by allowing the customers to pick up tangible personal property sold by the retailer at a place of business the entity maintains in Minnesota; or
  • shares management, business systems, business practices, or employees with the retailer, or engages in intercompany transactions with the retailer related to the activities that establish or maintain the retailer’s market in Minnesota.

 

Additionally, the requirement that, in order to be considered affiliated entities, the retailer and entity must be related parties is repealed.

 

The marketplace and affiliate nexus amendments are effective on the earlier of July 1, 2019, or the date of a U.S. Supreme Court decision modifying its decision in Quill Corp. v. North Dakota, so that a state may require retailers without a physical presence in the state to collect and remit sales tax. However, if a federal law is enacted authorizing a state to impose a requirement to collect and remit sales tax on retailers without a physical presence in the state, the Commissioner of Revenue must enforce the nexus amendments to the extent allowed under federal law. (Ch. 1 (H.F. 1 a), First Special Session, Laws 2017)

(06/08/2017)

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