Avalara Resource Center

Sales tax amnesty

A limited window to get relief on past sales tax is open in 23+ states. It provides a unique opportunity for qualifying sellers to erase back sales/use and income/franchise tax liability and become compliant. Learn more about the Multistate Tax Commission Online Marketplace Seller Voluntary Disclosure Initiative below.

What is the marketplace seller sales tax amnesty program?

Open to online marketplace sellers, the Aug. 17–Oct. 17 amnesty program will forgive back taxes, interest, and penalties for sellers that haven’t been collecting tax in states where they should. The amnesty is available in participating states only and applies to both sales/use tax and income/franchise tax. In exchange for this amnesty, businesses must register and begin collecting and remitting applicable taxes in the states that forgive their back taxes no later than Dec. 1, 2017.

Questions? We can help. Call (844) 722-5760 or email amnesty@avalara.com.

“This [amnesty program] is a once-in-a-lifetime opportunity. Many sellers aren’t charging sales tax, or are only filing in their home state, and they’re taking their chances. This is their chance to get it all right, and get it done.”
— Chris Marantette, President of NetRush, a digital retail agency representing premium brands on the Amazon marketplace

What are the details of the tax amnesty program?

Who: United States and foreign businesses that use a marketplace provider, such as Fulfillment by Amazon (FBA) or eBay, to fulfill orders on their behalf — such businesses are oftentimes known as marketplace sellers. To qualify, you must have inventory stored in a third-party fulfillment center in one or more of the participating states. You must not have any other tie to those states that creates nexus, the obligation to collect sales tax. Further, you must not have had any prior contact with those states concerning real or potential tax liability.

What: Sales/use and income/franchise tax amnesty for online marketplace sales into participating states — forgives applicable back taxes, interest, and penalties.

When: Aug. 17–Oct. 17, 2017. Taxpayers wishing to participate must file an application during this window.

Where: Alabama, Arkansas, Connecticut, Florida, Idaho, Iowa, Kansas, Kentucky, Louisiana, Missouri, New Jersey, North Carolina, Oklahoma, South Dakota, Tennessee, Texas, Utah, and Vermont are waiving all applicable back taxes. Colorado1, Massachusetts 2, Minnesota 3, Nebraska4, Washington, D.C.5, and Wisconsin6 are offering limited amnesty. Check back, this list may grow.

How: Interested businesses and states will work together via the Multistate Tax Commission (MTC) Voluntary Disclosure Program. Business info will not be revealed to states until both parties (the state and the business) sign the voluntary disclosure agreement.


1 Colorado will not assess any back liability for uncollected sales/use tax, and it agrees not to assess income tax for the time period prior to its four-year look-back period. Income tax due for the tax years included in its four-year look-back period, plus interest, must be paid.
2 Massachusetts is maintaining a look-back period. Details to be determined.
3 Minnesota is maintaining a look-back period. Details to be determined.
4 Nebraska will consider waiving back sales/use tax and income tax liability.
5 Washington, D.C. will consider a shorter look-back period than its typical three years for both sales/use and income/franchise tax.
6 Wisconsin will require businesses to remit unpaid sales/use and income/franchise tax plus interest going back to Jan. 1, 2015.

FAQ

Reach out to your tax advisor to discuss what’s right for you. If you don’t have a tax advisor, consider one of these.

For U.S. tax needs:

  • Peisner Johnson & Company is an accounting firm that has limited its practice solely to state and local tax consulting since its founding 25 years ago. The firm has helped thousands of companies in virtually every industry. About seven years ago, Peisner created a new service line focusing on ecommerce issues and is currently recognized as the leader in this field, especially when it comes to the FBA program.

    Contact: https://workshopfba.com/avalara-special-offer

  • Peterson Sullivan LLP has served clients in a variety of industries for more than 60 years. The State and Local Tax Team assists clients with the constantly changing state and local tax laws and regulations based on core values of integrity, respect and commitment. Peterson Sullivan LLP is part of Moore Stephens North America, an association of more than 360 accounting firms.

    Contact: Rachel Le Mieux, rlemieux@pscpa.com

  • TaxOps is an award-winning business tax specialty and advisory firm that delivers customized tax solutions to dynamic businesses nationwide. In addition to tax outsourcing through TaxOps, the firm offers targeted tax saving solutions and efficiency expertise through TaxOps Minimization and TaxOptimization.

    Contact: Judy Vorndran, jvorndran@taxops.com

  • YETTER/Sales Tax Institute offers a comprehensive and personalized program to help determine if the MTC amnesty program is right for your business. Click here to learn more or to sign up for YETTER’s amnesty consultation and application program to help resolve prior tax liabilities.

    Contact: http://www.yettertax.com/online-seller-amnesty-help/

For international tax needs:

  • PrietoDion Consulting is a U.S. tax advisory firm that specializes in addressing the unique concerns and specific issues of foreign (non-U.S.) FBA sellers and other sellers engaged in U.S. ecommerce. PrietoDion works with FBA and ecommerce sellers from throughout Europe, Canada, Asia, Australia, and Latin America and is ready to assist foreign sellers with this special state tax amnesty program.

    Contact: Sylvia Dion, sylviadion@prietodiontax.com

This is a question for you and your tax advisor to tackle. If you own inventory that’s housed in a third-party fulfillment center in a state where you do not currently collect tax, you may be out of compliance. Being out of compliance can represent a significant monetary risk.

An audit could leave you with a hefty bill for back taxes, plus interest on those back taxes and penalties for being out of compliance. The tax amnesty program is an opportunity for you to erase your back tax liability and start complying with state tax laws.

You have a tax obligation, or nexus, in a state when you have a physical presence there. This extends beyond having an office or employees in the state. If you have inventory in a state, even in a warehouse owned by a third party, you have nexus.

Sometimes it’s hard to track the exact location of your inventory. Amazon, for example, moves FBA inventory among its warehouses in different states, often without notifying sellers first. Once that inventory hits the ground in a state where you aren’t collecting tax but you are making sales, you’re out of compliance.

To apply, you can either submit one online application through the Multistate Tax Commission (MTC) or complete a separate PDF application for each state you’re applying to and email them to the MTC. The state(s) and tax type(s) you apply for are your choice.

The MTC will intervene with the state(s) on your behalf, keeping your information confidential until the voluntary disclosure agreement is finalized. Then you’ll connect with the state(s) to work out the details of your amnesty. You must also register directly with the state and comply with its tax laws by Dec. 1.

The amnesty program has a lot of people asking “what’s the catch?” But there isn’t necessarily one. Participating states are looking to bring unidentified sellers into compliance so they can broaden their tax revenue streams.

You’ll have to begin collecting and filing applicable taxes in the states where you seek amnesty, and this could increase your workload significantly, depending on how you choose to manage your compliance. Manual compliance, for example, takes much more time to manage than automated.

Participating states will not send out blanket statements about sellers that step forward during the program, though they could be required to answer direct questions about a particular seller.

You may luck out and continue flying under the radar of states where you’re out of compliance. But after the tax amnesty program concludes, states will likely increase efforts to uncover noncompliant sellers. If your luck runs out, you’ll be audited, and that will cost you.

States are facing serious revenue shortages, and their hunger for more tax revenue is only increasing. If they can’t get it from out-of-state sellers, they’ll try to get it from their customers. Take Colorado and Washington. They’re requiring out-of-state sellers to share information about their sales into the state and will then go after their customers to collect use tax.

There’s an overwhelming trend toward bringing more businesses into compliance. So you could choose to volunteer yourself for compliance through the amnesty program or wait until a later time. It will likely need to happen eventually.

You can keep trying to stay off states’ radars and keep those fingers crossed you won’t be audited. Or you can participate in a voluntary disclosure program directly with a state, if possible. A voluntary disclosure program is akin to an amnesty program in that it may waive some of the penalties and interest and may also offer a reduced look-back period.

If you decide the amnesty program is right for your business, apply through the MTC. While any business can prepare an application on their own, Avalara recommends working with a tax advisor, like one of the experts listed above, on any voluntary disclosure process.