Are you still considering whether to take advantage of the current amnesty program? Designed as a way for online sellers to become compliant in states they may have created nexus (either intentionally or inadvertently), the voluntary program provides an opportunity for these businesses to come forward if they haven’t been collecting income, franchise, use or sales tax.
The program originally was going to end on October 17. However, on October 11, the MTC voted to extend the application deadline to November 1. So contact us soon for help registering for this program!
How the Amnesty Program Works
Online marketplace and ecommerce sellers (particularly those using fulfillment services such as “Fulfillment by Amazon” or FBA) with outstanding sales and income tax liabilities use the Multistate Tax Commission’s Voluntary Disclosure Agreement to become tax compliant, and the participating states waive the fines and penalties for which sellers would generally be responsible. In several cases they are also waiving the tax itself!
This is an opportunity for online sellers with inventory in a third party warehouse to resolve prior back taxes. They are eligible if they:
- Have not filed any sales/use tax or income/franchise tax returns in the state
- Have not collected sales/use taxes
- Have not had any other prior contact with the state concerning liability or potential liability for sales/ use taxes or income/franchise taxes
- Are an online marketplace seller using a marketplace provider (such as Fulfillment by Amazon) to facilitate retail sales into the state
Companies that have created nexus in a state related to employees or third party contractor or prior office or warehouse rental are not eligible for the amnesty.
Participating states* include:
- District of Columbia
- New Jersey
- North Carolina
- Rhode Island
- South Dakota
*Some of these states include special provisions
Do You Need to Apply for the Amnesty Program?
As with everything, it depends. The good news is in most cases this program actually waives the taxes, penalties and interest that would normally be due. Also, the nice thing about this program is that companies can apply and remain anonymous during the process until the final agreements are ready to be signed.
However, if you participate in all states, you will now need to begin collecting and remitting use tax (and paying income tax) in more than 20 states. A quick analysis of a company’s prior sales and future anticipated sales might find that the actual liability exposure in some of those 20 states may be negligible. So entering into the amnesty may add a significant administrative burden on smaller companies.
That said, companies can opt for which states they’d like to engage with and do not need to file in all 20. We certainly don’t recommend that anyone do a blanket 20 state amnesty without working through the numbers. Also, remember that companies accepted into the amnesty must register and begin collecting and remitting sales tax by December 1 – just in time for holiday shopping! Hmmm – coincidence? We think not!
Contact us right away if you’d like to know more about this program or want help applying. Remember, the deadline is October 17, so the time to act is now!
Miles Consulting Group, Inc. is a professional service firm in San Jose, California specializing in multi-state tax solutions. Our firm addresses state and local tax issues for our clients, including general state tax consulting, nexus reviews, tax credit and tax incentive maximization, income tax and sales/use tax planning and other special projects. To learn more, contact us today at www.MilesConsultingGroup.com.