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MTC Sales Tax Amnesty for Amazon FBA Sellers

http://www.windwardtax.com/e-commerce-amazon-fba-servicesUPDATE: The MTC Sales Tax Amnesty program referenced in this blog has expired, however the information may be useful for future amnesty programs.  Please contact us for updates and assistance. 

 

For Amazon sellers who have been waiting to register for sales tax , the new Online Marketplace Seller Voluntary Disclosure Initiative provides the perfect opportunity in participating states. This program is being offered by The Multistate Tax Commission (MTC) and is very different from previous amnesty programs.

Normally during a sales tax amnesty, states agree to give taxpayers a break on interest and penalties owed, but the taxpayer still owes the sales tax due. During this offering, most states involved are waiving the lookback period for sales tax liability. This has the potential of being a great incentive to register for sales tax in these states.


What is the Online Marketplace Seller Voluntary Disclosure Initiative?

The Multi State Tax Commission (MTC) is offering a limited time voluntary disclosure agreement with select states.  An online marketplace seller, who has prior nexus in a state and has not registered for sales tax in that state, can come forward and voluntarily disclose their sales tax liability. In an effort to encourage online sellers to take advantage of this program, most states listed are offering an amnesty in which the state agrees to not pursue back tax liability for either sales and use tax or income and franchise tax or both. The seller can then register with no lookback period. The exceptions are Wisconsin and Colorado (see below).

The Online Marketplace Seller Voluntary Disclosure Initiative is being offered from August 17, 2017 until October 17, 2017. State sales tax registration must occur before December 1, 2017.

Which states are on the list? (Amazon FBA states are noted in RED)
• Alabama
• Arkansas
• Colorado** (Future Amazon state)
Connecticut (Amazon)
• District of Columbia***
Florida (Amazon)
• Idaho
• Iowa
Kansas (Amazon)
Kentucky (Amazon)
• Louisiana
 Massachusetts (Amazon)***
 Minnesota (Amazon)***
• Missouri
• Nebraska***
New Jersey (Amazon)
•  North Carolina
• Oklahoma
• South Dakota
Tennessee (Amazon)
Texas (Amazon)
• Utah (Future Amazon state)
• Vermont
Wisconsin* (Amazon)

*Wisconsin is using a 2 year lookback period where the taxpayer is responsible for taxes and penalties for the past 2 years
**Colorado is only participating in the sales and use tax, not income tax
***DC, MA, MN, NE will consider limiting or waiving some pf the lookback period on sales tax or income tax, depending on situation

Who can participate?
• The taxpayer must have NO prior contact with the state for the type of tax they are applying for with amnesty (sales/use tax, income/franchise tax or both).
• The taxpayer has nexus resulting from a third party situation (ie. Amazon warehouse). If you have nexus for any other reason (ie. employees, office building, etc.) you are not eligible.

What about those who may have recently registered?
You are not eligible for the program. However, recent registrants can apply and appeal to the state, asking for an exception.  Since this is a new program, there are no guarantees.
 
How do you participate?
1) Determine where you have sales tax nexus. Having inventory stored in a state, including inventory stored in an Amazon fulfillment warehouse, gives you nexus in that state. What is nexus? Nexus is a company’s presence in a state that determines if products they are selling are liable for sales tax. If you sell FBA (Fulfilled by Amazon), you will have nexus in any state where Amazon stores your inventory.  Find out where your inventory is located by using the Amazon inventory report or head over to your TaxJar Dashboard.

2) Fill out the MTC VDA application either online or by paper at http://www.mtc.gov/Nexus-Program/Online-Marketplace-Seller-Initiative. Ensure that the application is factual and complete (including an accurate nexus date and estimated tax liability for the past 4 years). If there are discrepancies, the state can void a signed agreement and look back as far as they can prove you had nexus.

3) A MTC representative will be assigned to the application. The application has an anonymous number instead of any identifying information. The MTC will present the application to the state.  The application process is expected to take 30-60 days.

4) Once the application is approved by the state, a VDA agreement is drawn up and sent to the taxpayer for signature. The signed agreement is sent to the state and at that time the identifying information is released. Any sales tax or income tax returns due must be submitted to the state at this time. Windward Tax can refer you to a firm to handle your past filings.

5) The taxpayer then has until 12/1/17 to register for sales tax with the state.

Cherry Bekaert is available to help you file the Online Marketplace Seller Voluntary Disclosure Form along with registering you for sales tax in each state. If you are a seller who has been waiting to register for sales tax, we encourage you to take advantage of this amnesty program while it is being offered and take steps toward becoming sales tax compliant.  Click below to contact us with questions or for more information.
 
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Tiffany Rodi
Written by Tiffany Rodi
Tiffany works directly with clients to make sure state sales tax registrations for e-Commerce and Amazon FBA sellers are completed in a timely and efficient manner. Tiffany serves as the primary contact with our e-Commerce clients and assists them through the entire registration process.

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