Amazon Seller Sales & Income Tax Nexus: Voluntary Disclosure Initiative
Fulfillment by Amazon (FBA) is a service under which sellers list their products with Amazon and Amazon holds their inventory at one of its warehouses before shipping the products to purchasers. Sellers who do not have any other presence in the state where their inventory is stored have created a sufficient presence by storing their inventory with Amazon. This presence causes nexus for sales tax, corporate tax, and personal income taxes for sellers using the FBA program.
Sellers who have state tax nexus for sales tax and do not collect and remit the appropriate sales taxes can be responsible for the potential outstanding liability, plus penalties and interest, as well as tax return filings for sales and income taxes.
The Multistate Tax Commission (MTC) National Nexus Program is offering a special limited-time voluntary disclosure initiative (described below), in which the following states are participating:
Alabama, Arkansas, Colorado, Connecticut, Florida, Idaho, Iowa, Kansas, Kentucky, Louisiana, Nebraska, New Jersey, Oklahoma, South Dakota, Texas, Utah, Vermont, and Wisconsin.
The States listed above will consider applications for voluntary disclosure received by Multistate Tax Commission (MTC) staff during the time period August 17, 2017 through October 17, 2017.
Normally, when a taxpayer applies for voluntary disclosure relief with states through the MTC, the taxpayer will be required to file returns and pay back tax liability, plus interest, for the lookback period that the state uses, which is generally the prior three to four years or more. The state will then waive tax liability, interest and penalties for the time period prior to the lookback period. Under the special time-limited initiative described above, for taxpayers meeting the criteria below, the states identified above (there are some exceptions) will agree to waive sales/use and income/franchise back tax liability, including penalties and interest, for prior tax periods, without regard to any lookback period, provided the taxpayer moves into compliance and registers as a seller or retailer to collect, report and remit sales/use tax and commences to file sales/use tax returns and remit sales/use tax as of the effective date of the agreement (no later than December 1, 2017).
Taxpayers meeting the following criteria are eligible:
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 taxes or income/franchise taxes.
- The taxpayer is an online marketplace seller using a marketplace provider/facilitator (such as the Amazon FBA program or similar platform or program) to facilitate retail sales into the state and has no physical presence nexus in the state, except for the online marketplace seller’s inventory stored in a third-party fulfillment center located in the state.
- The taxpayer has timely applied electronically to the state for voluntary disclosure relief through the MTC Multistate Voluntary Disclosure Program (MVDP).
If you have questions or wish to learn more about how this could affect you, have a Barnes Dennig team member reach out to you by sharing your questions here.