By: Kayla Kormylo, Staff Accountant
Everyday, more and more consumers are turning to e-commerce over traditional retailers for their purchasing needs. At the rate e-commerce is growing, awareness of state sales and use tax requirements are becoming substantially more relevant. A select number of states have agreed to allow sales tax amnesty, or “forgiveness”, to third-party online sellers for certain unpaid state taxes.
From August 17 to October 17, 2017, Fulfillment by Amazon (FBA) sellers and other marketplace sellers have a unique opportunity in up to 21 states, as of current, to claim amnesty for prior unpaid state sales or use taxes.
Whether or not a business is responsible for states sales or use tax is determined by nexus. Nexus is defined as sufficient temporary or permanent physical presence in a state. Presence is determined by people, such as employees or service agents, or by property, such as inventory or warehouses. Nexus may be created for Amazon FBA sellers when their inventory is shipped to an Amazon fulfillment center. This could require the seller to collect and remit sales or use tax to the state in which the fulfillment center is located.
The recently announced sales tax amnesty program allows many third-party market sellers the opportunity to start with a clean slate for the participating states. Most states are willing to waive any unpaid sales tax, as well as related interest and penalties, for the entire lookback period, typically the last 3 to 4 years.
The Nexus Committee of the Multistate Tax Commission (MTC) is taking charge of this amnesty program. In order to enroll in the amnesty program you must submit, either electronically or by mail, an Application for Multistate Voluntary Disclosure to the MTC from August 17 – October 17, 2017. There is no requirement to voluntarily disclose to all participating states but you must submit a separate voluntary disclosure for each state in which you are seeking amnesty.
A few eligibility requirements for the sales tax amnesty program include:
1. The business has not yet registered as a seller or retailer, nor have they filed tax returns with or made tax payments to, the state for which they are seeking amnesty.
2. The taxpayer is an online marketplace seller that requires the use of a marketplace provider to fulfill sales into a state in which it has not established physical presence.
3. In all states in which amnesty is sought, the taxpayer will agree to register as a seller or retailer and will timely collect, report, and remit all tax for future retail sales to customers in that state.
The states currently participating in the program are:
• Alabama
• Arkansas
• Colorado
• Connecticut
• District of Columbia
• Florida
• Idaho
• Iowa
• Kansas
• Kentucky
• Louisiana
• Massachusetts
• Minnesota
• Missouri
• Nebraska
• New Jersey
• North Carolina
• Oklahoma
• South Dakota
• Tennessee
• Texas
• Utah
• Vermont
• Wisconsin
All the above states are all willing to allow for some type of amnesty but they are not all the same. If you are interested in learning more about this amnesty program, including specifics for each state or eligibility, please contact us.