Multistate Tax Commission Offers Unprecedented Tax Amnesty Program for Online Sellers

The Multistate Tax Commission (MTC) is currently offering a limited time voluntary disclosure initiative for online sellers who have sales/use or income/franchise tax liabilities triggered by the utilization of online marketplace providers. Numerous tax experts have voiced their concern that these liabilities are large enough to cause immense financial damage or even bankruptcy for the businesses that have incurred them. In many states, sellers who utilize online marketplace providers (the most common provider being Amazon) have established nexus. Nexus is a sufficient connection with a taxing jurisdiction that triggers tax collection and remittance responsibilities. While Nexus due to these arrangements is most commonly created through the holding of the seller’s inventory by the marketplace provider, it can also be created by various market activities performed by the provider on behalf of the seller.

These nexus creating scenarios have often gone unnoticed by the sellers involved and the years of doing business with marketplace providers have led to the accumulation of incredibly high tax liabilities, with the MTC estimating approximately $2 billion in uncollected sales tax for Amazon affiliated sellers alone. However, this voluntary disclosure initiative provides an opportunity for these businesses to be forgiven from their devastating liabilities. Through the MTC program, sellers in this situation could have all their uncollected or unremitted Sales/Use and Income/Franchise taxes forgiven, with most of the states participating offering complete amnesty, including the waiving of all penalties and interest within the applicable lookback period.

The following states are participating in the program: 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, and Wisconsin*. Of the participating states, the following contains Amazon fulfillment facilities: Connecticut, Florida, Kansas, Kentucky, New Jersey, Tennessee, Texas, and Wisconsin.

Sellers applying must meet certain criteria to be considered eligible for the initiative. This criterion includes but is not limited to:  (1) The applicant is not currently registered with the state taxing authority, (2) the applicant has no other nexus creating circumstances besides those created by an arrangement with an online marketplace provider, (3) the applicant files their application within the provided time frame, (4) the applicant, once granted amnesty, registers for the applicable tax accounts by Dec. 1, 2017.

The program parameters allow for the applicant to maintain complete anonymity throughout the entire process, with the MTC revealing the applicant's name only if a Voluntary Disclosure Agreement is reached and signed. However, applicants should be mindful that there is audit risk in the scenario where their application is denied and the information provided (such as contact information) leads to the identification of the applicant.

The MTC began accepting applications August 17, 2017, and will continue to do so until the deadline October 17, 2017.

* Certain exceptions to the program apply in these states

 

Tips for the Taxpayer

If you are an online seller of the taxable property and are affiliated with Amazon or another online marketplace provider, conduct a thorough nexus review of your online operations. You will not only have to determine if you have the nexus creating scenarios that qualify for the program, but also determine if you have the kind of nexus creating scenarios (such as a salesperson operating in the applicable states) that make you ineligible for the program. You will also need to determine which states you need to apply for amnesty in, which tax programs, for which years, and what your estimated back tax liabilities are.

Ensure that you take steps to protect and maintain your anonymity in the event that your application is denied so as to limit your audit exposure.

All applications for the initiative must be received by the MTC by Oct. 17, 2017. The necessary steps to evaluate your eligibility for the program and prepare an application will be highly time-consuming. We recommend you to take actions immediately in order to meet this deadline.

Allyn recommends that you consult with a tax expert before you submit your application. The above recommendations are extensive and can be easily misevaluated. This amnesty program is almost certainly a one-time opportunity to rectify severe tax liabilities, you will want to ensure that it is handled correctly.

 

How Can We Help?

Allyn’s tax team is staffed with seasoned tax professionals who consistently conduct nexus reviews and coordinate with state taxing authorities on behalf of our clients. We will do a full review of your business activities to determine whether or not you qualify for the program and if it is the right choice for you. Allyn can ensure that your application is completed timely, accurately and shield you from identification until a Voluntary Disclosure Agreement is signed.

Allyn will also review your activities in states that are not participating in the program so as to assess your audit risk and develop an action plan to reduce your liability through direct negotiation with the applicable jurisdictions.

After the program is completed, your company will not only need to register for the relevant tax accounts but also need to establish procedures for continued compliance in sales/use, income, property and other miscellaneous tax responsibilities. Allyn has been managing these tasks on behalf of clients in various industries in every US jurisdiction for over 25 years. Our tax analysts can set up your tax processes for you, reducing the burden on your company and giving you the opportunity to focus on your core business.

Contact us and we can provide a customized cost-effective solution to meet your company’s needs. For further information on Allyn Tax services, please contact tax@allynintl.com.

 

For More Information

If you are interested in learning more about this topic or other tax topics, please visit our Tax Publications under News and Events at www.allynintl.com.

 

Jordan Perri

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About Allyn International

Allyn International is dedicated to providing high quality, customer centric services and solutions for the global marketplace. Allyn's core products include transportation management, logistics sourcing, freight forwarding, supply chain consulting, tax management and global trade compliance.  Allyn clients range from small local businesses to Fortune 500 firms. Allyn conducts business in more than 20 languages and has extensive experience in both developed and emerging markets. Highly trained experts are positioned throughout North America, Europe, and Asia. Allyn’s regional headquarters are strategically located in Fort Myers, Florida, U.S.A, Shanghai, P.R. China and Prague, Czech Republic. For more information, visit www.allynintl.com.