The Multistate Tax Commission (MTC) has announced a limited-time voluntary disclosure initiative for both sales and use and income/franchise taxes for unregistered online marketplace sellers that have established nexus and historical exposure as a result of storing inventory in third-party fulfillment centers (e.g. Amazon FBA program). The benefit to participation is that most of the participating states will waive any sales/use tax, income/franchise tax liability, including penalties and interest for prior tax periods. As part of the agreement, the seller must register to collect and remit sales and use tax no later than December 1, 2017. For income/franchise taxes, taxpayers must file returns, beginning with the 2017 tax year.
Participating States
- Alabama
- Arkansas
- Colorado* (Colorado will waive the lookback period for sales / use tax. Colorado will not waive the lookback period for income tax. The four-year lookback period will apply.)
- Connecticut*
- Florida*
- Idaho
- Iowa
- Kansas*
- Kentucky*
- Louisiana
- Nebraska
- New Jersey*
- Oklahoma
- South Dakota (South Dakota does not impose an income tax.)
- Tennessee*
- Texas*
- Utah* (Warehouse opening in 2017)
- Vermont
- Wisconsin* (Wisconsin will require payment of tax and interest owed from January 1, 2015 forward, but will forgive taxes prior to that date.)
*Amazon fulfillment center in state
Voluntary Disclosure Details
Taxpayers wishing to take advantage of this opportunity may anonymously apply for voluntary disclosure with each state online via the MTC website prior to October 17, 2017. Taxpayer information will not be disclosed until registration with the taxing authority and execution of the voluntary disclosure agreement is complete.
Taxpayers will be able to choose which state and tax type (sales/use, income/franchise, or both) to apply for under the program. Additionally, taxpayers may withdraw an application for voluntary disclosure to a specific state, or all states, at any time prior to registering and signing a voluntary disclosure agreement.
In order to be eligible, applicants must meet the following criteria:
- The taxpayer must not be registered with the state taxing authority for the tax type the taxpayer is wishing to pursue voluntary disclosure, or had any other prior contact with the state concerning liability or potential liability for such tax type.
- The taxpayer is an online marketplace seller using a marketplace provider/facilitator (such as the Amazon FBA program) to facilitate retail sales into the state and has no location, property, employees, or agents in the state, except for the online marketplace seller’s inventory stored in a third-party warehouse or fulfillment center.
States participating in this special time-limited voluntary disclosure initiative have agreed not to disclose to other taxing jurisdictions the identity of any taxpayer entering into a voluntary disclosure agreement, except as required by law, pursuant to a court order, or in response to an inter-government exchange of information agreement.
The estimated time to complete processing is 30-60 days.
Foreign Sellers
International tax treaties are unlikely to eliminate many of the income or sales tax liabilities that foreign sellers could face; therefore, this may be an appropriate time to consider the MTC voluntary disclosure relief being offered. Tax authorities around the world are more interconnected than ever, which makes it harder for foreign sellers to escape latent US tax liabilities.
Do not miss out on this limited-time opportunity. For more information, please contact Sarah Beirne at 847-205-5000 or sbeirne@millercooper.com
