U.S. amnesty offers ‘clean slate’ for missed sales tax
- Aug 16, 2017 | Jason Moore
European businesses have until 21st October to decide if they wish to take advantage of America’s MTC sales tax amnesty
The 17th August 2017 marks the start of America’s MTC (multi state tax commission) sales tax amnesty. Sales tax is the U.S. equivalent of VAT – the money that must be remitted to the appropriate tax authority for the sale of goods or services. Unlike VAT however, it is collected by the retailer at the final sale, rather than throughout the supply chain.
The amnesty is designed to boost future compliance with collection and remittance of sales tax, a gap which is currently costing the MTC billions of dollars in lost revenue.
Retailers now have a window of opportunity to register for sales tax in states in which they are holding stock or selling, without fear of having to pay back any unpaid taxes that may be owed. Any penalties or interest payments incurred will also be waived. European businesses selling through online marketplaces, such as Amazon FBA, into the U.S. should be ready to take advantage.
Marketplaces such as Amazon FBA (Fulfillment by Amazon) and eBay drive more than a trillion dollars in annual sales, but their distributed nature adds a layer of complication to the definition of ‘physical presence’ when defining responsibility to collect and remit sales tax. When sales tax was introduced after the Great Depression, the U.S. did not envisage inventory being such an important trigger of taxable status.
According to laws passed in certain states, you are deemed to have a physical presence in that state if you have inventory in a marketplace provider’s warehouse or distribution centre. Inventory is deemed to be property, and it was ruled long ago by the courts that property in a state created nexus.
The amnesty is a compliance gift, but will leave many sellers with an additional administrative burden to understand and then comply with sales tax obligations. Once accepted onto the amnesty programme, sellers will need to register for sales tax in. They will then also need to ensure sales tax is charged on their sales moving forward, and that these taxes are filed to the authorities.
Register for our webinar, which will help ensure you are aware of your options and obligations – and whether you could save on your potential tax bill.
Sacha Wilson, Director Global Tax Automation EMEA
Join Michael Fleming, director of Peisner Johnson, and Scott Peterson, Vice President of U.S. Tax Policy and Government Relations for Avalara, to find out what you need to know about the Online Marketplace Voluntary Disclosure Initiative from the Multistate Tax Commission.