The Multistate Tax Commission (MTC) is offering a voluntary tax disclosure initiative for online marketplace sellers in participating states from August 17, 2017, to October 17, 2017. The initiative provides relief for sales and use tax, income/franchise tax, or both, and related penalties and interest.
Participating states include Alabama, Arkansas, Colorado, Connecticut, Florida, Idaho, Iowa, Kansas, Kentucky, Louisiana, Nebraska, New Jersey, Oklahoma, South Dakota, Tennessee, Texas, Utah, Vermont, and Wisconsin. These states will consider applications for relief received by MTC staff during the initiative period.
Requirements for Participation
To be eligible, taxpayers must meet several criteria, as listed below.
Not Registered with State
The taxpayer has not yet:
- registered with the state taxing authority,
- filed returns with such state for the tax type for which the taxpayer is seeking relief,
- made payments of such taxes to, or had any other prior contact with the state concerning liability or for such tax type.
Online Marketplace Seller Using a Facilitator
The taxpayer is an online marketplace seller using a marketplace provider/facilitator and has no:
- location, property, employees, or agents in the state except for inventory stored in a third-party warehouse or fulfillment center; or
- other nexus-creating activities of the marketplace provider/facilitator on behalf of the online marketplace seller in the state.
A “marketplace provider/facilitator” is a person who:
- facilitates a retail sale by an online marketplace seller by:
- listing or advertising for sale by the online marketplace seller on a website, tangible personal property, services, or digital goods that are subject to sales or use tax,
- either directly or indirectly through agreements or arrangements with third parties collecting payment from the customer and transmitting that payment to the online marketplace seller; and
- provides fulfillment services to the online marketplace seller.
Examples of “marketplace provider/facilitators” include the Amazon FBA program or similar platform or program that facilitate retail sales into the state.
Timely Application for Relief
The taxpayer must apply electronically for relief through the MTC Multistate Voluntary Disclosure Program (MVDP). In the application, the taxpayer must state that it is applying for relief under this initiative. The taxpayer also must provide complete and accurate information in its application.
Note: The application form requests that the applicant provide an estimate of back tax liability to the state for the prior four years and contains the statement: “National Nexus Program staff will not process an application when the good-faith estimate for all tax-types for the look-back period is less than $500 in this state.”
Applications received under this initiative will be processed, even when estimated back tax liability is less than $500. Also, response times permitted in this initiative may be shorter than those provided in the MTC Procedures for Voluntary Disclosure.
MTV accepts applications made online or with a PDF application form that is emailed to MTC staff at firstname.lastname@example.org.
Past Due Tax Related to Online Retail Sales
The taxpayer seeks relief from any past due sales or use tax and if applicable, income/franchise tax liability in connection with its online retail sales activity in the state. States will not grant relief for sales or use tax collected but not remitted.
As provided in the MTC Procedures of Multistate Voluntary Disclosure, a taxpayer can apply to a state for voluntary disclosure anonymously. A taxpayer will not be required to disclose its identity to the state until the taxpayer registers with the state and the voluntary disclosure agreement is executed. The taxpayer may choose which state and which tax type for which to seek relief. The taxpayer can also withdraw an application at any time before entering into a voluntary disclosure agreement.
The states participating in this initiative will not disclose to other taxing jurisdictions the identity of a taxpayer entering into an agreement However, disclosure may be required by law, court order, or in a response to an inter-government exchange of information agreement.
Registration, Return Filing, and Payment of Taxes
Normally, when a taxpayer applies for relief through the MTC MVDP, the taxpayer must file returns and pay back tax liability plus interest for the lookback period that the state uses. The state will then waive tax liability, interest, and penalties for the time period prior to the lookback period. Under the initiative, most states agree to waive sales and use and income/franchise back tax liability for prior tax periods, without regard to a lookback period. Penalties and interest also will be waived.
However, taxpayers liable for sales tax must register in that state to collect, report, and remit sales and use tax, file sales and use tax returns, and remit sales and use tax. These requirements must be met as of the effective date in the voluntary disclosure agreement. That date can be no later than December 1, 2017. In addition, taxpayers subject to income/franchise tax must file tax returns in the state and pay tax due. That filing obligation starts with the tax year that includes the effective date of the voluntary disclosure agreement. That date also can be no later than December 1, 2017.
Colorado will waive any back tax liability for uncollected sales/use tax. However, Colorado 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:
- beginning January 1, 2015, for sales and use tax; and
- including the prior tax years of 2015 and 2016 for income/franchise tax.
The MTC discusses the voluntary disclosure initiative and provides application forms on its website at http://www.mtc.gov/Nexus-Program/Online-Marketplace-Seller-Initiative.
Online Marketplace Seller Voluntary Disclosure Initiative, Multistate Tax Commission, August 2017