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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)

Tennessee has enacted legislation delaying the start date of the sales and use tax provisions that bring Tennessee sales and use tax law into compliance with the Streamlined Sales and Use Tax Agreement. The provisions are now set to take effect July 1, 2019 (previously July 1, 2017). Tennessee continues its history of delaying the date for full implementation of Streamlined.  It is the only associate member state under the agreement. The sales and use tax changes that have been delayed include: 

 

  • requirements that sales delivered or shipped to the customer be sourced to the delivery or shipping destination;
  • changes to the single article limitation on local option sales taxes;
  • acceptance of alternative documentation to support a resale exemption for drop shipments into the state
  • use of a single sales and use tax return covering multiple dealer locations; and
  • implementation of certain privilege taxes in lieu of sales tax.

 

(Tenn. Code Ann. §67-6-702; Important Notice No. 17-06, Tennessee Department of Revenue, April 2017)

(07/11/2017)

Effective April 26, 2017, Tennessee has enacted legislation authorizing local governments to levy a local option transit surcharge on the following local privilege taxes, provided the underlying local privilege tax is being collected at the time a transit improvement program is adopted:

 

  • local option sales tax;
  • business tax;
  • motor vehicle tax;
  • local rental car tax;
  • tourist accommodation/hotel occupancy tax; and
  • residential development tax.

 

A "transit improvement program" is a program that consists of specified public transit system projects and services. A "public transit system" is any mass transit system intended for shared passenger transport services to the general public and includes related property and equipment as well as infrastructure for the system to operate such as roads, highways, alleys and sidewalks.

 

Any surcharge so imposed will be a separate charge in addition to local privilege taxes. A "local government," is defined as any county in Tennessee, including a county with a metropolitan or consolidated form of government with a population in excess of 112,000 and any city in Tennessee with a population in excess of 165,000. This includes Chattanooga, Knoxville, Nashville and Memphis as well as a number of counties. If approved by a majority of the number of registered voters of the local government voting in an election on the question, the surcharge will remain in effect until a specific date or condition of termination specified in the ordinance or resolution adopting the surcharge, or until the surcharge is repealed in the same manner in which it was adopted.

 

In general, the transit surcharge is administered in the same manner as the underlying local tax and subject to the same conditions, limitation, exemption, credits and returns. However, the following items are exempt from the local option transit surcharge in regardto the local option sales and use tax:

 

  • water sold to or used by manufacturers that is taxed at the state rate of 1%;
  • sales of tangible personal property to a common carrier for use outside the state;
  • video programming services;
  • telecommunication services;
  • specified digital products; and
  • sales of tangible personal property when obtained from any vending machine or device and taxed at the local rate of 2.25%.

 

Any surcharge on the local option sales and use tax will apply only to the first $1,600 on the sale or use of any single article of personal property.No local government can impose a surcharge that exceeds the maximum rate for the underlying local option sales and use tax.  The surcharge on the local option sales and use tax will not apply to sales made by dealers with no location in Tennessee who choose to pay local tax.The earliest a transit surcharge can be effective is October 1, 2017. (H.B. 534, Laws 2017)

(06/05/2017)

Effective July 1, 2017, Tennessee will reduce the state sales and use tax rate on food and food ingredients from 5% to 4%. Note that the applicable local sales and use tax rate (up to 2.75%, depending on the locality) also applies to these sales. “Food and food ingredients” are defined as substances, whether in liquid, concentrated, solid, frozen, dried, or dehydrated form, that are sold for ingestion or chewing by humans and are consumed for their taste or nutritional value. “Food and food ingredients” does not include alcoholic beverages, tobacco, candy, dietary supplements or prepared food, which continue to be subject to the general state sales and use tax rate of 7%, plus the applicable local tax rate. (Important Notice No. 17-07, Tennessee Department of Revenue, April 2017)

(06/05/2017)

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