Online Marketplace Seller Voluntary Disclosure Initiative Update for Amazon FBA Sellers

Amazon FBA Sellers: Online Marketplace Seller Voluntary Disclosure Initiative Update

The big opportunity for Amazon FBA sellers who have never collected and remitted sales tax to apply for Sales Tax Amnesty (or complete sales tax and income tax forgiveness) in many states, even several non-FBA states, is now clarified and available. This is a ONE-TIME special, a limited offer from August 17th to October 17th,  with an agreement to register for a sales tax permit by December 1st and remit sales tax moving forward in the state you apply for Amnesty.

Not all states participating are FBA (fulfillment by Amazon). Only if you have sales tax nexus in the non-FBA states with a past liability of $500* or more would you apply for Amnesty in the non-FBA states; also, if this was your home state or you had an office which created nexus, and you did not collect and remit sales tax.

Here is a list of updated States and eligibility required by the MTC.gov:

  • Alabama (Non-FBA)
  • Arkansas (Non-FBA)
  • Colorado[1]
  • Connecticut
  • District of Columbia[2]
  • Florida
  • Idaho (Non-FBA)
  • Iowa (Non-FBA)
  • Kansas
  • Kentucky
  • Louisiana (Non-FBA)
  • Nebraska[3] (Non-FBA)
  • New Jersey
  • Missouri
  • Oklahoma (Non-FBA)
  • South Dakota [4] (Non-FBA)
  • Tennessee
  • Texas
  • Utah (Non-FBA)
  • Vermont (Non-FBA)
  • Wisconsin [5]

The States listed above will consider applications for voluntary disclosure received by Multistate Tax Commission (MTC) staff during the time period August 17, 2017, through November 1st, 2017, from taxpayers meeting the following eligibility criteria (updated criteria from recent October 11th meeting):

  1. The taxpayer has not yet registered with the state taxing authority, filed returns with such state for the tax type that the taxpayer is seeking voluntary disclosure relief for (sales/use tax, income/franchise tax, or both), made payments of such taxes to, or had any other prior contact with the state concerning liability or potential liability for such tax type.
  2. The taxpayer is an online marketplace seller using a marketplace provider/facilitator (such as the Amazon FBA program or similar platform or 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 located in the state, or other nexus-creating activities of the marketplace provider/facilitator on behalf of the online marketplace seller in the state. A “marketplace provider/facilitator” is a person who facilitates a retail sale by an online marketplace seller by (1) listing or advertising for sale by the online marketplace seller on a website, tangible personal property, services, or digital goods that are subject to sales/use tax; (2) either directly or indirectly through agreements or arrangements with third parties collecting payment from the customer and transmitting that payment to the online marketplace seller; and provides fulfillment services to the online marketplace seller.
  3. The taxpayer has timely applied to the Sales Tax System (STS) between the time period of August 17, 2017, through October 5th, 2017.  STS will process your application in accordance with the process set forth with the Multistate Voluntary Disclosure Program.
  4. The taxpayer will state in the application that the taxpayer is applying for voluntary disclosure relief under this initiative and provide complete and accurate disclosure of the information requested, which will be used to establish eligibility.
  5. The taxpayer is seeking relief from any past due to sales/use tax, including interest and penalties. If applicable, income/franchise tax liability, including interest and penalties, in connection with its online retail sales activity in the state, except for sales/use tax collected but not remitted, with the taxpayer agreeing to register as a seller or retailer with the state and timely collect, report and remit sales/use tax and file returns on all taxable retail sales to customers in the state prospectively as of the effective date (not later than December 1, 2017—taxpayers are encouraged to commence collection and remittance of sales/use tax before that date) of the voluntary disclosure agreement. If subject to income/franchise tax, the taxpayer further agrees to timely file income/franchise returns and pay such taxes due, commencing with the tax year, including the effective date (not later than December 1, 2017) of the voluntary disclosure agreement. If the taxpayer has any collected but unremitted sales/use tax, the taxpayer agrees to remit such tax to the state, including penalties and interest.

NOTE: A taxpayer can 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 are executed. The taxpayer may choose which state and tax type (sales/use tax- income/franchise tax or both) to seek voluntary disclosure relief. The taxpayer can also withdraw the application for voluntary disclosure with any state at any time before the execution of the voluntary disclosure agreement.
Note: See footnotes for Wisconsin and Colorado.  Wisconsin will require payment of back tax liability and interest for the following look back periods: for sale/use tax, commencing January 1, 2015; for income/franchise tax, including tax years 2015 and 2016.  The lookback period will be limited to prior years, during which the marketplace seller had nexus.  Colorado will provide back tax liability relief for sales/use tax but require payment of back tax liability and interest for a 4-year lookback period for income/franchise tax.

To take advantage of this Amnesty Program, there are several key questions and factors to consider:

  • In which states do you qualify for Amnesty?
  • Determining how to calculate your tax liability in each state is easy; your state sales subject to sales tax multiplied by the state sales tax rate.
  • How to determine your income and franchise tax liability in each state, which may also be part of Amnesty?
  • What is your time frame and timing to apply for sales tax permits (which is required after filing Amnesty?
  • What happens if you don’t apply for a sales tax permit by the December 1st deadline?
  • What options do foreign FBA sellers need to consider to meet the time frames when many states require your application to be mailed to a state?
  • What other services will a foreign seller require to make this a streamlined process (especially when applying for sales tax permits)?
  • How do you handle other states you are behind on that are NOT a part of the Amnesty program?

The great news is that becoming a client of Sales Tax System will help provide resources to these questions and more, plus special member pricing to file for Amnesty in these states so you may focus on gearing up for your holiday sales and promoting your Amazon FBA business.

Even though the MTC VDA application says you must have a minimum sales tax liability of $500 in a state (after you had nexus) for this Amnesty period, they waive that requirement. That means if you owed $150 in back sales tax liability, you could apply for Amnesty in a state.

[1] Colorado will waive any back tax liability for uncollected sales/use tax. However, Colorado will not waive back tax liability for income tax beyond its normal four-year lookback period. Colorado notes that it already has a small seller income tax nexus exception for sales less than $500,000 into the state.
[2] D.C.’s standard lookback period is 3 years for sales/use and income/franchise tax. D.C. will consider granting a shorter or no lookback period for applications received under this initiative.
[3] Nebraska will consider waiving back tax liability for uncollected sales/use tax and income tax. 
[4] South Dakota imposes sales/use tax but does not impose an income tax. 
[5] Wisconsin will require payment of back tax and interest for a look back period commencing January 1, 2015, for sales/use tax, including the prior tax years of 2015 and 2016 for income/franchise tax. 
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