New Tax Amnesty Opportunity for Online Sellers

It has been a crazy busy week here! The Multistate Tax Commission (MTC) just announced its Online Marketplace Seller Voluntary Disclosure Initiative. The initiative is a limited-time sales/use tax and income/franchise tax amnesty program for online sellers which will run from August 17 to November 1, 2017 (previously October 17, 2017). During this period, online sellers with potential tax liability may be able to use the MTC’s voluntary disclosure agreement (VDA) to negotiate a settlement with participating MTC states if they meet certain eligibility requirements.

There are a lot of questions as to who qualifies and is this really a good opportunity for online sellers.

We also will be available to help those who would like to take advantage of the program but would like some help. To learn more about what we are doing visit the YETTER Online Seller Amnesty Help page.

There are some significant benefits for qualified online sellers that participate in the initiative. For sellers meeting the eligibility requirements, the participating states will waive sales/use tax and income/franchise back tax liability, including penalties and interest, for prior tax periods, without regard to any look-back period, if the seller registers to collect, report and remit sales/use tax as of the effective date set forth in the voluntary disclosure agreement. If the seller is subject to income/franchise tax, the taxpayer must agree to file income/franchise tax returns and pay tax due, commencing with the tax year that includes the effective date of the voluntary disclosure agreement (not later than December 1, 2017, or not later than 30 days after the taxpayer has received notice that the state has signed the voluntary disclosure agreement, whichever date is later).

Here’s some information to get you thinking about whether this even applies to you and if it is right for your company.

25 MTC member states have agreed to participate in the initiative. 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)

The participating states will consider applications for voluntary disclosure received by the MTC during the program dates from taxpayers meeting the following eligibility criteria:

1. The taxpayer has not yet registered as a seller or retailer, filed sales/use tax or income/franchise tax returns with, made payments of such taxes to, or had any other prior contact with the state concerning liability or potential liability for sales/use tax or income/franchise tax.
2. The taxpayer is an online marketplace seller using a marketplace provider/facilitator (such as Amazon FBA) to facilitate retail sales into the state and has no physical presence nexus in the state, except for the marketplace seller’s inventory stored in a third-party fulfillment center located in the state or through other nexus-creating activities of the marketplace provider/facilitator on behalf of the marketplace seller in the state.
3. The taxpayer has timely applied electronically (using the MTC application) to the state for voluntary disclosure relief through the MTC Multistate Voluntary Disclosure Program.
4. The taxpayer is seeking relief from any past due sales/use tax, including interest and penalties, and if applicable, income/franchise tax liability, including interest and penalties, in connection with its online retail sales activity in the state, except for sales/use tax collected but not remitted. The taxpayer must agree to register as a seller or retailer with the state and timely collect, report and remit sales/use tax and file returns on all taxable retail sales to customers in the state prospectively as of the effective date (not later than December 1, 2017) of the voluntary disclosure agreement. If subject to income/franchise tax, the taxpayer agrees to timely file income/franchise returns and pay taxes due, commencing with the tax year including the effective date (not later than December 1, 2017) of the voluntary disclosure agreement.  If the taxpayer has any collected but unremitted sales/use tax, then the taxpayer agrees to remit such tax to the state, including penalties and interest.

Taxpayers can apply to a state for voluntary disclosure anonymously and will not be required to disclose their identity to the state until they register with the state and the voluntary disclosure agreement is executed. Taxpayers can choose which state and which tax type (sales/use tax, income/franchise tax or both) to seek voluntary disclosure relief for. For more details visit the MTC website.

For those of you who are interested in participating in the MTC initiative but could use some assistance, we are offering a packaged service to help you with the process. This will include a review of your tax history, a one-on-one consult with Diane Yetter to review your facts and qualification for the program and recommended course of action, options for tax collection solutions and amnesty application completion services for states where you may qualify. For more information, visit the YETTER Online Seller Amnesty Help page.

This is really unprecedented. The only other time that I can recall states offering full forgiveness of prior periods was when the Streamlined Sales Tax Agreement went into effect.  With all the uncertainty related to remote seller legislation including in places like Massachusetts, this could be a way to evaluate and reduce your risk for not just sales tax but also income tax. We look forward to helping you break through all the rules and weigh the benefits of the program and the impact to your company of the decision.

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, contact us here. You can also check out our Wayfair Risk Analysis consultation.