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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)

On April 27, 2017, a bipartisan group of senators introduced the Marketplace Fairness Act of 2017 (MFA). Similar legislation was introduced in both 2013 and 2015 and failed to be enacted both times. If enacted, the legislation would authorize states meeting certain requirements to require remote sellers that do not meet a "small seller exception" to collect their state and local sales and use taxes. The small seller exception is set again at $1 million of remote sales annually. The only other significant change from the 2015 version is a prohibition of making the effective date during the 4th quarter of the calendar year. For information on the previous versions of the bill, visit Senate Introduces Marketplace Fairness Act of 2015.  

 

On April 27, 2017, a bipartisan group of lawmakers introduced the Remote Transactions Parity Act (RTPA) of 2017. Similar legislation was introduced in 2015 but failed to be enacted. Like the MFA, the legislation would also create sales and use tax collection obligations for remote sellers, but has some differences and additional provisions. Some key differences from the Marketplace Fairness Act include a different definition of a small seller.  The RTPA has a phased in threshold starting at $10million in year one, then $5million, then $1million.  In year 4, there is no threshold.  In addition to the monetary thresholds, any seller that sells on an electronic marketplace is considered a small seller.  A difference from the 2015 version of the bill is an inclusion of a definition of remote seller which specifies when a company is NOT a remote seller which includes physical presences for more than 15 days in a state, leasing or owning real property and using an agent to establish or maintain the market in a state if the agent does not perform business services in the state for any other person during the taxable year.  For more information on the Remote Transaction Parity Act of 2015, visit House Introduces Remote Transactions Parity Act of 2015. (Marketplace Fairness Act of 2017, Remote Transactions Parity Act of 2017)

(05/04/2017)

Wyoming has enacted economic nexus legislation pertaining to remote sellers. Effective July 1, 2017, remote sellers without a physical presence in Wyoming are required to collect and remit sales tax on sales in the state once the seller meets either of the following requirements in the current calendar year or immediately preceding calendar year: 

 

  • The seller's gross revenue from the sale of tangible personal property, admissions or services delivered into Wyoming exceeds $100,000, or
  • The seller sold tangible personal property, admissions or services delivered into Wyoming in 200 or more separate transactions.

 

Notwithstanding other provisions of the law, the Wyoming Department of Revenue may bring an action to obtain a declaratory judgment that a seller is obligated to remit sales tax. This provision is similar to the South Dakota provisions which allows the state to initiate action against remote sellers that do not register to collect the tax.  Upon the filing of an action for declaratory judgment, the court shall grant an injunction prohibiting the enforcement of the collection against any seller that is party to the action.  We will monitor the courts for filing by remote sellers or the state and the impact on remote sellers.  It does appear that the injunction is only against sellers that are party to the action filed. The legislation also amends the definition of "vendor" to include a remote seller. (H.B. 19, Laws 2017, effective July 1, 2017)

 

UPDATE: On June 28, 2017, the trade associations American Catalog Mailers Association and NetChoice filed a lawsuit against the Wyoming Director of Revenue, challenging the constitutionality of the state’s economic nexus legislation. The American Catalog Mailers Association and NetChoice are challenging the legislation as being in violation of the Commerce Clause of the U.S. Constitution as interpreted by the Supreme Court in Quill v. North Dakota. The trade associations made attempts to convince Wyoming to suspend enforcement of the provision pending the decision in the South Dakota case on economic nexus but the state declined to voluntarily suspend enforcement of the economic nexus provisions.  The statute included provisions that prohibit the state from enforcing the obligation to collect Wyoming sales tax against any person that is party to the action upon the filing of an action for declaratory judgment.  This provision applies if the state files an action, it is unclear if the injunction will apply to this action automatically or if it will only apply to members of the two associations that filed the action.  We recommend that no company voluntarily elect to collect if their only presence in the state is under these economic nexus provisions.  We will continue to monitor for developments. (American Catalog Mailers Association and NetChoice v. Dan Noble, in his capacity as the Director of the Wyoming Department of Revenue)

(08/04/2017)

Amazon.com has entered into a voluntary sales tax collection agreement with the state of Wyoming. Amazon will begin collecting Wyoming sales tax on its sales to Wyoming consumers and businesses beginning March 1, 2017. This does not necessarily mean that all sellers that sell on the Amazon platform will begin collecting taxes.  The Legislature is considering a remote seller’s bill which would apply to all internet sales. H.B. 19 was introduced December 8, 2016 and passed the House January 17, 2017.  This would impose an economic nexus standard and require sellers making more than $100,000 in sales or 200 or more separate transactions in Wyoming to register and collect the sales tax.  (News Release, Wyoming Governor Matt Mead, January 12, 2017)

(01/31/2017)

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