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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)

In conjunction with the implementation of remote seller collection and notice/reporting rules, Vermont has modified the rules related to use tax accrual for individuals.  Effective retroactively to January 1, 2017, and applicable to returns filed for tax year 2017 and after, Vermont’s provision requiring reporting of use tax on individual income tax returns is amended to state that taxpayers are not required to pay more than $500 for such use tax liability arising from total purchases of items with a purchase price of $1,000 or less. Additionally, the amount of use tax that a taxpayer may elect to report is 0.10% of their adjusted gross income (previously 0.20% of their Vermont adjusted gross income). The percentage amount is no longer to be indexed annually. (H.B. 516, Laws 2017)

(10/23/2017)

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 July 1, 2017, Vermont has enacted legislation that requires non-collecting vendors making sales into Vermont to file with the Department of Taxes on or before January 31 of each year a copy of the notice notifying purchasers that sales or use tax is due on nonexempt purchases they make from the vendor and that Vermont requires the purchaser to file a sales or use tax return. The submission of this document relates to the annual notice that must be sent to all customers who made more than $500 in purchases from a non-collecting vendor. (see http://www.salestaxinstitute.com/resources/news/vermont-enacts-notice-reporting-requirements-and-economic-nexus-legislation) This requirement only applies to non-collecting vendors who made $100,000 or more of sales into Vermont in the previous calendar year. Failure to file a copy of the notice will subject the non-collecting vendor to a penalty of $10 for each failure, unless the non-collecting vendor shows reasonable cause. (H.B. 516, Laws 2017)

(06/19/2017)

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