Washington Offers Marketplace Fairness Penalty Reduction Program

The Washington State Department of Revenue (DOR) has announced its Marketplace Fairness Penalty Reduction Program to help businesses comply with the state’s marketplace nexus legislation, which became effective January 1, 2018. Businesses that have had physical presence in the state prior to January 1, 2018 have tax liabilities prior to this date and are subject to tax collection responsibilities that could extend to the date business began or up to 8 years.  Businesses that apply to register for the program by June 30, 2018 may receive reduced penalties and additional benefits. The program offers several benefits for taxpayers:

• The look-back period for tax liability is limited to the prior four years plus the current year (as opposed to seven years plus the current year)
• Up to 39% in penalties can be waived, which include a 5% assessment penalty for substantially underpaid tax; a 5% unregistered penalty; and a 29% late payment of a return penalty

Note that full statutory interest will still be imposed on all amounts due.

To qualify for the program, a business must have:

• Never registered with or reported taxes to the DOR
• Never been contacted by the DOR for enforcement purposes (see note below)
• Not engaged in evasion or misrepresentation in reporting tax liabilities

If the DOR’s records indicate that a business had previous contact with the DOR, it may still be eligible for reduced penalties. The taxpayer would need to contact the DOR employee who they previously communicated with for more information by June 30, 2018.

If a business has unregistered affiliates, subsidiaries or related entities that are required to register, a separate application to the program would need to be filed for each business entity.

At the time of application, taxpayers will be asked to disclose the business name and contact information. However, taxpayers can choose to apply anonymously, in which case they have 15 calendar days from the application to disclose the business identity. If the information is not disclosed within 15 days, the application will not be approved and the taxpayer would need to reapply.

For additional details on applying for and completing the program, click here to visit the Washington DOR’s program webpage.

The DOR notes that the $20,000 penalty for not complying with the state’s notice requirements will not be waived under this program, and taxpayers would need to apply for a separate waiver. The DOR can be contacted at [email protected] for more information. (Washington State Penalty Reduction Program for Marketplace Fairness, Department of Revenue, Washington State)