A one-time multistate voluntary disclosure program for online marketplace sellers drew 852 applicants during its application window, which closed Nov. 1, 2017. Participating states are waiving some or all back sales or use and/or franchise or income tax liability for sellers accepted into the program, provided they register with the state(s) and collect and remit applicable taxes by Dec. 1, 2017, or within 30 days of acceptance.
The program, which was coordinated by the Multistate Tax Commission (MTC) National Nexus Program, was offered in 24 states and the District of Columbia. Alabama, Arkansas, Connecticut, Florida, Idaho, Iowa, Kansas, Kentucky, Louisiana, Missouri, New Jersey, North Carolina, Oklahoma, Rhode Island, Texas, Utah, and Vermont waived all back taxes for participating sellers, while Colorado, D.C., Massachusetts, Minnesota, Nebraska, South Dakota, Tennessee, and Wisconsin offered more limited amnesty. For the curious, details about the program are available from the MTC.
Ongoing voluntary disclosure programs
Although the MTC online marketplace seller voluntary disclosure program has concluded, there are other opportunities for non-collecting sellers to become compliant and reduce penalties. The MTC National Nexus Program runs an ongoing multistate voluntary disclosure program, which “provides a way for a taxpayer with potential tax liability in multiple states (including the District of Columbia) to negotiate a settlement.” According to the MTC, taxpayers with potential liability in multiple states will find working through them to be “faster, more efficient, and less costly” than working with each state separately.
Most states offer voluntary disclosure programs through their departments of revenue. States generally hold taxpayers liable for taxes accrued during the lookback period, which can last seven or more years, but forgive all or a portion of tax liability for prior periods. Penalties and interest accrued during the lookback period are often forgiven or reduced, as well. In addition, sellers accepted into these programs generally won’t face criminal prosecution for failure to remit taxes in the past. Details vary from state to state, so thorough research is advised.
State tax amnesty programs
In addition to ongoing voluntary disclosure programs, states periodically offer temporary sales tax amnesty programs. While voluntary disclosure programs aim to increase compliance among non-collecting businesses, tax amnesty programs generally apply to registered sellers with delinquent taxes.
State tax amnesty programs are designed to boost revenue by encouraging delinquent taxpayers to come forward and pay the taxes owed. Generally, in exchange for paying delinquent taxes in full and a portion of the interest owed, states will waive the remaining interest and penalties.
Upcoming state tax amnesty programs include:
- Ohio Tax Amnesty, Jan. 1 through Feb. 15, 2018
- Rhode Island Tax Amnesty, Dec. 1, 2017 through Feb. 15, 2018
- Texas Tax Amnesty (exact dates to be announced)
A Virginia tax amnesty program that began Sept. 13 concludes at midnight tonight, Nov. 14.
Learn more about tax amnesty and voluntary disclosure programs at the Avalara Resource Center.