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Sales Tax Amnesty Program

New Sales Tax Amnesty Program For Online Sellers Begins August 17 

September 2017 - Due to the rise of e-commerce activities in recent years, state and local governments have instituted a new sales tax amnesty program lasting from August 17 to October 17 to crack down on online sellers operating within their boundaries. This is only the second time in United States history that states have banded together to forgive back taxes. This voluntary disclosure program offers online marketplace sellers that leverage warehouses, such as Amazon’s Fulfillment centers, the opportunity to register for the amnesty program without the penalty of back taxes. Amnesty programs typically only apply to registered taxpayers and limits penalties and interest, but require taxpayers to pay all back taxes owed. In this new program, however, the eligible back taxes will be waived in most states. This program is also unique in that it’s limited to sellers whose only nexus with a state is through inventory in a fulfillment facility or warehouse.

Online businesses that have significant nexus with more than one state may disclose multiple states through the amnesty program. A nexus study can be conducted to determine if a seller has employees, service people or independent sales/service agents or inventory, offices and warehouses. An online seller with multi-state nexus that forgoes registration faces the risk to their finances down the road via back taxes, interest and penalties from numerous states.

To be eligible for the amnesty program the taxpayer must determine if they have not yet:

·         registered with the state taxing authority;

·         filed returns with such state for the tax type for which the taxpayer is seeking relief; or

·         made payments of such taxes to, or had any other prior contact with the state concerning liability or for such tax type.

A taxpayer may apply to a state for voluntary disclosure anonymously and will not be required to disclose its identity to the state until the taxpayer registers with the state and the voluntary disclosure agreement is executed. The taxpayer may choose which state and which tax type for which to seek relief. The taxpayer can also withdraw an application at any time before entering a voluntary disclosure agreement. Businesses can also apply for income/franchise tax amnesty. If the state waives the tax, penalties and interest are automatically waived as well.

The states participating in this initiative will not disclose to other taxing jurisdictions the identity of a taxpayer entering an agreement; however, disclosure may be required by law, court order, or in a response to an inter-government exchange of information agreement.

The participating states include Alabama, Arkansas, Colorado, Connecticut, District of Columbia, Florida, Idaho, Iowa, Kansas, Kentucky, Louisiana, Massachusetts, Minnesota, Missouri, Nebraska, New Jersey, North Carolina, Oklahoma, South Dakota, Tennessee, Texas, Utah, Vermont, and Wisconsin.

For additional information on this topic, please contact Rob Whittall at +1.216.470.5633 or rob.whittall@dykeyaxley.com.

This Newsletter is informational only and should not be construed as personalized advice. ©2017 Dyke Yaxley LLC.

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