Tax Amnesty for Online Marketplace Sellers
Posted on 08.17.17
By Terry Barrett, CPA, Tax Senior Manager | State & Local Tax Team
The Multistate Tax Commission (MTC) announced recently a sales tax amnesty program for sellers who use Fulfillment by Amazon (FBA) or other online marketplaces to distribute their products to customers. Problems arise for such sellers as most states take the position that having inventory in a state creates sufficient connection with the state to require the sellers to collect sales/use tax on their sales to in-state customers. Online marketplace sellers often take the position that because they do not know exactly where their inventory is (as for example, if using FBA, Amazon may move it from one distribution facility to another based upon the proximity to areas of greater demand), tax registration and collection requirements are uncertain.
Amnesty Program Dates
The amnesty program will be held August 17 – October 17, 2017 and will be coordinated by the MTC. By coming forward to participate in the Amnesty program and registering for collection of the sales/use tax and filing income/franchise tax returns on a prospective basis, the online marketplace sellers will receive waiver of back uncollected sales/use tax and income/franchise tax due and any related interest and penalties. They must agree to file income/franchise tax returns for 2017 and begin collecting and remitting sales/use tax no later than December 1, 2017, in order to be accepted into the amnesty program. There are certain criteria that must be met to be eligible to participate. These, include, but are not limited to, the seller must not be registered with the state taxing authority for the tax type for which the voluntary disclosure is sought, the seller must not have had any other prior contact with the state regarding potential liability for the tax type, etc.
State Participating in MTC's Voluntary Disclosure Program
Twenty-four states currently are signed up to work through the MTC’s Voluntary Disclosure program to offer amnesty, in full or in part, to these sellers. These states include: Alabama, Arkansas, Colorado, Connecticut, District of Columbia, Florida, Idaho, Iowa, Kansas, Kentucky, Louisiana, Massachusetts, Minnesota, Nebraska, New Jersey, North Carolina, Oklahoma, South Dakota, Tennessee, Texas, Utah, Vermont, and Wisconsin. Colorado will waive back uncollected sales/use tax but will require the filing of income tax returns for four years; the District of Columbia will consider granting a lookback period shorter than its standard three years or possibly no lookback period; Massachusetts may consider a shorter lookback period than its standard three years, depending upon when vendor nexus was created; Minnesota will consider lookback periods to the time when the marketplace seller created nexus if shorter than its standard three years for sales/use tax and four years for income/franchise tax; Nebraska will consider waiving back tax liability for uncollected sales/use tax and income tax; and Wisconsin will require the payment of back sales/use and income taxes (and interest) from January 1, 2015 forward. Tennessee’s business tax, as well as its sales/use tax and franchise and excise tax, are eligible for amnesty. It is noteworthy that North Carolina will consider applications from sellers who have previously been contacted by the state regarding potential tax liability. Other states are considering participating as well, however not all of these may waive all prior liabilities.
If you are an FBA or other online marketplace seller who has not been collecting sales/use tax on sales in the above states, you may want to consider participation in the MTC’s amnesty program.
Read more on Tax Amnesty Programs.
Sources: MTC Webinar