Posted September 5, 2017

24 states in online sales tax amnesty program

Voluntary disclosure program ends on October 17.

The Multistate Tax Commission (MTC) is offering a limited-time, multistate voluntary disclosure agreement (VDA) opportunity for certain businesses who sell online and have nexus in a participating state because of the location of their inventories.

Specifically, the VDA opportunity applies to businesses selling through a third-party online marketplace provider or facilitator (e.g., Amazon) that stores the businesses’ inventory in the providers/facilitators’ own warehouses or fulfillment centers in the participating state. This program does not apply to businesses who sell online but who store inventory in their own warehouses/fulfillment centers.

States will waive all liabilities, including penalties, interest, and tax for all prior years.

Unlike most VDA programs, this one is uniquely beneficial because, with limited exceptions, it will eliminate all tax, interest, and penalty liabilities in participating states for all prior years, and only requires prospective compliance.

Eligibility for the sales tax amnesty

The special VDA initiative will run from August 17, 2017, through October 17, 2017. It is only available for online sellers that have nexus in a state as a result of activities from their marketplace providers/facilitators.

Marketplace providers are companies like Amazon that facilitate online transactions between a seller and a buyer. Typically, the nexus-creating activity is in-state inventory located in a warehouse that is operated by the marketplace provider (e.g., “fulfilled by Amazon”). Generally, seller-owned inventory located in a state creates nexus in that state for both sales tax and income tax purposes, despite the fact that the seller may not know where its inventory is located, and it eliminates the seller’s Public Law 86-272 protection from income tax.

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Source: CliftonLarsenAllen