Erase your tax obligations with the current and upcoming amnesty programs.
There always seems to be an amnesty program going on somewhere, particularly if you know where to look.
States are aggressively pursuing delinquent taxpayers, while still making it relatively easy for them to come forward themselves. Last year, we wrote an article about some interesting amnesty programs in Connecticut (CT), Ohio (OH), and Rhode Island (RI).
Most amnesty programs allow for a waiver of penalties and a limitation on interest if businesses come forward under the terms of the program as specified by the state legislature. Most of the programs are limited in time (often only a two to three month window) and only cover certain taxes. Yet, with the right fact pattern, a company might benefit from engaging in such a program. But not always. As with most things related to multi-state tax issues, the answer may require a little more research and analysis.
The Swift River running through the White Mountains of New Hampshire.
This month, we travel to the New England region of United States to New Hampshire. Known as the Granite State, it is defined by its quaint towns and large expanses of wilderness.
New Hampshire is a state with some mighty history. In January 1776, it became the first of the British North American Colonies to establish a government independent of the Kingdom of Great Britain’s authority, and it was the first to establish its own constitution. Six months later, it became one of the original 13 states that founded the United States of America, and in June 1788 it was the ninth state to ratify the Constitution, bringing that document into effect.
United States Supreme Court.
The United States Supreme Court announced on January 12, that it has granted certiorari and will hear a case related to state taxes – something that does not happen often! The High Court could finally settle an ongoing battle between e-retailers and states about how online purchases are taxed, and in the process may overturn a 1992 ruling which currently prevents states from collecting sales taxes on online purchases unless the seller has a physical presence in the state. An overhaul of this nature would change the state tax landscape significantly and require more online sellers to collect sales tax.
Based on a long standing Supreme Court ruling from 1992 (Quill Corp. v. North Dakota), online retailers are not required to collect sales tax unless they have a physical presence (such as an office, inventory, or people) in a state. Over the past several years as online purchases have become prolific and states are losing sales tax revenue, the states have fought back by passing creative legislation to allow for collection of sales tax on online purchases. Several state legislatures have recently enacted laws referred to as “economic nexus” provisions, where a company creates nexus in a state by virtue of a minimum amount of sales revenue or instances of sales into a state, instead of looking to the physical presence threshold. Some states, like Colorado, have passed onerous reporting mechanisms to, in effect, report on their customers who may not be self-assessing use tax.
What states are coming up with amnesty programs of their own?
Across the U.S., amnesty seems to be a popular topic these days. The Multistate Tax Commission’s (MTC) special amnesty program for marketplace retailers recently ended. And a few other states have recently announced their own amnesty programs so that they can benefit from potential increased compliance as well. Connecticut (CT), Ohio (OH) and Rhode Island (RI) are the latest states to roll out amnesty programs of their own. And we expect others to follow. The states administer amnesty programs because they want to induce companies to become compliant by waiving, or limiting penalties and interest for prior unpaid taxes.
Recent MTC amnesty program
Many states just took part in a special amnesty program. The MTC had negotiated this special program for online sellers using marketplace fulfillment services (such as Fulfillment by Amazon) that created nexus and thereby had sales tax and income tax obligations. Twenty five states participated, including CT and RI. To find out more about this amnesty program, click here.
This special amnesty program waived taxes in addition to interest and penalties. We’ve cautioned our clients not to expect amnesties to be that generous in the future. Most state amnesties allow taxpayers to waive penalties and some interest, but rarely the tax itself.
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.
A cowboy at the reins of an old pioneer wagon.
This month brings us to the Sooner State of Oklahoma. The state lies between the Great Plains to the West and the Ozark Plateau to the East and is in the Gulf of Mexico watershed, generally sloping from the high plains of its western boundary to the low wetlands of its southeastern boundary. With small mountain ranges, prairies, mesas and eastern forests, most of the state lies in the Great Plains, Cross Timbers, and the U.S. Interior Highlands, a region prone to severe weather.
Oklahoma is on a confluence of three major American cultural regions and historically served as a route for cattle drives, a destination for southern settlers, and a government-sanctioned territory for Native Americans.
I just returned from an amazing vacation – a cruise of the Mediterranean. We started in Athens, Greece; spent just a couple days there enjoying the history, and then boarded our ship. The cruise took us to the Greek isles of Santorini and Crete, and then we sailed to Italy, the beautiful St. Tropez, France, and finally Barcelona, Spain. We finished our vacation by sampling many, many tapas and wines in Barcelona. About midway through our vacation, I found myself wondering – how could I do US multistate tax consulting somewhere in Europe? I’m still working on that angle, and will certainly keep you posted.
But meanwhile, on the flip side of that equation, we’ve been engaging with several foreign companies who have US operations and find our state tax laws to be, well, challenging! As I tell all my foreign clients – trust me, they are challenging for US companies too! Here are some of the main things for foreign companies to think about as they begin doing business in the US.
White Sands National Monument full of white sand dunes and gypsum crystals.
Welcome to the Land of Enchantment! This month we travel to the southwestern state of New Mexico. The states of New Mexico, Colorado, Arizona and Utah come together at the Four Corners in the northwestern corner of the state, the only such occurrence in the U.S. Although a large state, New Mexico has very little water, with a surface area of only about 250 square miles.
Inhabited by Native Americans for thousands of years before European Exploration, New Mexico was colonized in 1598 by the Imperial Spanish viceroyalty of New Spain. Later, it was part of independent Mexico before becoming a U.S. territory and eventually a U.S. state, as a result of the Mexican-American War. Among the U.S. states, New Mexico has the highest percentage of Hispanics, including descendants of the original Spanish colonists who have lived in the area for more than 400 years beginning in 1598. The demography and culture are shaped by these strong Hispanic and Native American Influences and is also expressed in the state flag. Its scarlet and gold colors are taken from the royal standards of Spain, along with the ancient symbol of the Zia, a Pueblo-related tribe.
Annapolis, Maryland: Naval Academy Chapel Dome and Harbor Queen tour vessel at City Dock.
This month we travel to the birthplace of religious freedom in America, the state of Maryland. Formed by George Calvert in the early 17th Century, the state was intended as a refuge for persecuted Catholics from England. George Calvert was the first Lord of Baltimore and the first English proprietor of the then-Maryland colonial grant. Maryland was the seventh state to ratify the U.S. Constitution, and played a pivotal role in the founding of Washington D.C., which was established on land donated by the state.
Mid-Atlantic Maryland is defined by its abundant waterways and coastlines on the Chesapeake Bay and Atlantic Ocean. Its largest city, Baltimore, has a history as a major seaport, and is also home to such tourist attractions as the National Aquarium and the Maryland Science Center.