Eliminate Significant Back Taxes – Online Marketplace Seller Voluntary Disclosure Program
Published on by Cheryl Ganim in State Local Tax, Tax Services
The Nexus Committee Extended the Application Due Date for Special Voluntary Disclosure to November 1, 2017 from October 17, 2017.
Under the special time-limited initiative, taxpayers can eliminate significant tax liabilities. For taxpayers meeting specific criteria, most of the states identified below 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 registers as a seller or retailer to collect, report and remit sales/use tax and commences to file and remit sales/use tax returns.
Online Marketplace sellers, such as Amazon FBA (Fulfillment by Amazon) Sellers are required to register and file sales tax returns in most states where Amazon warehouses are located. If sales of taxable goods are shipped into such states, the FBA Seller should file sales tax returns. If a seller utilizes a warehouse (in this case, an Amazon fulfillment center), then sales tax nexus is created in that state because the seller has inventory in the state.
Sellers may be unaware that sales tax nexus has been established in a state because Amazon may transfer inventory from the original warehouse the seller shipped goods to, to any number of warehouses. The seller receives a statement from Amazon listing inventory “ship from” locations which may indicate nexus has been established. The seller may otherwise have no nexus activities in a state, but suddenly finds themselves with a sales tax collection and filing requirement, in addition to an income tax filing requirement. Typically, an out-of-state company is “engaged in business” in a state when they have (directly or indirectly), a sales office, warehouse or storage place, or sales representative located in the state.
A seller who does not collect sales tax in a state in which they have nexus becomes liable for the outstanding tax due up to seven years, plus penalties and interest. The original sales tax liability should have been charged to the customer, but the liability shifts to the seller when unpaid.
The Multistate Tax Commission National Nexus Program is offering a special limited time voluntary disclosure initiative in which the following states are participating:
Alabama, Arkansas, Colorado, Connecticut, District of Columbia, Florida, Idaho, Iowa, Kansas, Kentucky, Louisiana, Massachusetts, Minnesota, Missouri, Nebraska, New Jersey, North Carolina, Oklahoma, Rhode Island, South Dakota, Tennessee, Texas, Utah, Vermont, and Wisconsin.
Additional Resources:
Read more about the Voluntary Disclosure Initiative on our blog by clicking here.
If you have questions about this program, and how to utilize this tax incentive, a member of the Barnes Dennig state and local tax team is available to help. Ask us a quick question here, and we’ll have someone reach out to you.
