New Jersey voluntary disclosure program for out-of-state sellers
- Sep 14, 2017 | Gail Cole
New Jersey presents a unique opportunity for out-of-state businesses with New Jersey sales or use tax liability. The state’s Division of Taxation is offering a Voluntary Disclosure Program (VDP) to encourage sales and use tax compliance among out-of-state businesses that have an obligation to collect and remit New Jersey sales tax, but don’t.
Click-through nexus triggers tax obligation for remote retailers
Certain out-of-state sellers have been required to collect and remit New Jersey sales and use tax since July 1, 2014, under the state’s click-through nexus law (N.J.S.A. 54:32B-2(i)(l)). A remote retailer has nexus — a connection substantial enough to warrant a tax obligation — with New Jersey if:
- The seller enters into an agreement with a New Jersey independent contractor or other representative for compensation in exchange for referring customers via a link on a website, or otherwise, to that out-of-state seller; and
- The seller has more than $10,000 in annual sales from these referrals to customers in New Jersey.
See the division’s Technical Bulletin 78(R) for additional details regarding New Jersey’s click-through nexus law.
Voluntary Disclosure Program
The VDP currently being offered by New Jersey is open to out-of-state sellers that don’t collect or remit tax in New Jersey but have established nexus with the state through online solicitation as described above.
The program runs Aug. 21–Nov. 21, 2017. Qualifying taxpayers who participate must:
- File any required returns for the two quarters between Jan. 1, 2017, and June 30, 2017
- Register with the Division of Revenue and Enterprise Services within 45 days of the execution of the agreement
- Electronically file all applicable sales and use tax returns and remit payment of the tax due within 45 days of the execution of the agreement
- Pay statutory interest (“prime rate plus 3% as applicable to each period at issue”) within 30 days of filing the sales and use tax returns
In exchange, the Division of Taxation will waive all penalties and consider all prior periods closed for participants.
Taxpayers who have been previously contacted by the Division of Taxation regarding sales and use tax compliance are not eligible for the program. Additional information.
Voluntary disclosure program for marketplace sellers
The New Jersey VDP is not to be confused with a voluntary disclosure program for online marketplace sellers that’s currently being conducted through the Multistate Tax Commission (MTC), although New Jersey is also participating in that.
The marketplace seller sales tax amnesty program is only open to online marketplace sellers, such as Fulfillment by Amazon (FBA) or Etsy sellers, that have no other tie to the state. It started Aug. 17, 2017, and will accept applications until Oct. 17, 2017. New Jersey will forgive back taxes, interest, and penalties for businesses accepted into the program.