An update on the new amnesty program.
Last month, we updated our readers on an ongoing amnesty program for state taxes that is currently taking effect. As this program could be helpful to sellers utilizing fulfillment marketplaces, we wanted to provide an update on this program so qualified companies can take advantage of the potential benefits of the amnesty.
What exactly is it?
Despite certain online sellers, like Amazon, volunteering to collect tax across the U.S., many online sellers are not collecting tax in states where they may have (intentionally or inadvertently) created nexus. Amnesty programs encourage companies to become compliant in a given state. This one is a grand-scale amnesty, covering many states.
The nexus committee of the Multistate Tax Commission (MTC) approved the MTC to participate in a multistate sales tax amnesty program for third-party sellers whose only nexus with a state is the use of fulfillment services offered by third-party marketplaces. The Multistate Voluntary Disclosure Program (MVDP) provides a way for a taxpayer with a potential tax liability in multiple states, to negotiate a settlement, using a uniform procedure.
Could an Amnesty Program erase your tax burden?
There is a new scheduled amnesty program that may help businesses correct overlooked tax obligations if they have been selling products and services in other states. Many companies engage in multi-state sales through an intermediary, like Amazon, eBay and similar organizations called “fulfillment services.” The fulfillment centers place a seller’s inventory in warehouses in multiple states to expedite shipping, but in the process, create nexus for the seller in those states. As such, the sellers have an obligation to collect sales tax and pay income tax. Unfortunately, unpaid taxes may incur penalties and interest. Now there may be a short time window to correct these errors and avoid interest and penalties.
On Monday, July 31, the nexus committee of the Multistate Tax Commission (MTC) approved the MTC to participate in a multistate sales tax amnesty program for third-party sellers whose only nexus with a state is the use of fulfillment services offered by third-party marketplaces. The MTC is an intergovernmental state tax agency working on behalf of states and taxpayers to facilitate the equitable and efficient administration of state tax laws that apply to multistate and multinational enterprises.
Harrisburg capitol building
Pennsylvania, like many other states, is adjusting its tax statutes to include more goods and services within the taxable definitions. Following recent changes to its somewhat confusing new legislation, the state issued a ‘clarifying’ bulletin for use in interpreting the new requirements. In this blog, we will discuss a few areas of this clarification as well as an amnesty program available to some businesses.
Electronically or Digitally Delivered Items (i.e., Digital Downloads)
This new Sales, Use & Hotel Occupancy Tax Bulletin 16-001, was drafted on July 21, 2016 and became effective on August 1, 2016. This bulletin clarifies recently enacted legislation related to digital products. The legislation applies a tax regime to many of the newly created revenue streams developed by the digital industry. Unlike the traditional taxes on things we can touch and feel (i.e. tangible property) lawmakers want to expand the tax revenue base to ‘new age’ things. As you might expect, the attempt to do so has resulted initially in some confusion. The bulletin is an attempt to clarify the new legislation. It explains that a state sales and use tax is imposed on electronically or digitally delivered, streamed or accessed video, photographs, books, any other taxable printed matter, applications (i.e., “apps”), games, music, any other audio, including satellite radio service, canned software, or any other otherwise taxable tangible personal property. Additionally, updates or support on these items are also taxable.