News for online marketplace sellers in participating states: beginning August 17, 2017 through October 17, 2017, the Multistate Tax Commission (MTC) is offering a limited-time voluntary disclosure initiative. Relief provided under the program applies to sales and use tax and income/franchise tax. Read below for how you can benefit from this time-sensitive opportunity.
DETAILS ON ELIGIBLILITY
The following states will consider applications for voluntary disclosure received by the MTC during the initiative period: Alabama, Arkansas, Colorado, Connecticut, Florida, Idaho, Iowa, Kansas, Kentucky, Louisiana, Nebraska, New Jersey, Oklahoma, South Dakota, Tennessee, Texas, Utah, Vermont, and Wisconsin.
To be eligible for the program, a taxpayer must meet the following criteria:
- The taxpayer has not registered with the state taxing authority, filed returns with the state for the tax type for which it is seeking voluntary disclosure relief, made payments of such taxes to, or had any other prior contact with the state concerning the potential liability for such tax type.
- The taxpayer is an online marketplace seller using a marketplace facilitator, such as Amazon.com or similar platform, to facilitate retail sales into a state, and has no location, property, employees, or agents in the state except for inventory stored in a third-party warehouse or fulfillment center located in the state. A marketplace facilitator is one who facilitates a retail sale by:
- listing for sale tangible personal property, services or digital goods that are subject to sales or use tax of the online marketplace seller on a website;
- either directly, or indirectly through agreements with third parties collecting payment from the customer, transmits the payment to the online marketplace seller; and
- provides fulfillment services to the online marketplace seller.
- The taxpayer timely applies electronically to the state for voluntary disclosure relief through the MTC voluntary disclosure program. The taxpayer will need to explain in the application that the taxpayer is applying for voluntary disclosure relief under this initiative and provide complete and accurate disclosure of the information requested.
The application requires that the taxpayer provide an estimate of the tax liability to the particular state for the prior 4 years. Eligible applicants can receive relief from any past due sales or use tax, including interest and penalties, as well as income/franchise tax liability, including interest and penalties, in connection with its online retail sales activity.
Taxpayers must agree to register as a retailer with the state and timely collect, report, and remit sales and use tax and file returns on all taxable retail sales to customers in the state prospectively as of the effective date of the voluntary disclosure agreement (not later than December 1, 2017). If a taxpayer is subject to income/franchise tax, the taxpayer must further agree to timely file income/franchise returns and pay such taxes due, commencing with the tax year including the effective date of the voluntary disclosure agreement.
It should be noted that taxpayers who have any collected but unremitted sales or use tax are not eligible for this voluntary disclosure program and must remit such tax to the state, including interest and penalties.
Under the MTC voluntary disclosure procedures, a taxpayer can apply to the program anonymously and will not be required to disclose its identity until it registers with the state and the voluntary disclosure agreement is executed. The taxpayer may choose which state(s) and which tax type(s) for which to seek voluntary disclosure relief. The taxpayer can also withdraw a voluntary disclosure application at any time prior to execution of the agreement.
The states participating in this special initiative have agreed not to disclose to other taxing jurisdictions the identity of any taxpayer entering into a voluntary disclosure agreement under this initiative, except as required by law, pursuant to a court order, or in response to an inter-government exchange of information agreement in which the requesting entity provides the taxpayer’s name and taxpayer identification number. Blanket requests from other jurisdictions for the identity of such taxpayers will not be honored.
NOTES FOR SPECIFIC PARTICIPATING STATES
Information is outlined below for the following states:
- Colorado will waive any back tax liability for uncollected sales/use tax. However, the state will not waive back tax liability for income tax beyond its normal four-year lookback.
- Nebraska will consider waiving back tax liability for uncollected sales/use tax and income tax.
- South Dakota imposes sales and use tax but does not impose income tax.
- Wisconsin will require payment of back tax and interest for a lookback period commencing January 1, 2015, for sales and use tax, and including the prior tax years of 2015 and 2016 for income/franchise tax.
To take advantage of the MTC voluntary disclosure initiative, contact us.