If your retail clients sell through a marketplace provider/facilitator or a third-party fulfillment company such as Fulfillment by Amazon (Amazon FBA), eBay, RedStag Fulfillment, ShipBob, etc., they may have established a sales tax collection responsibility in the state where their goods are being stored by the third-party business.
Many states consider storing inventory in the warehouse of a third-party business to be physical presence in a state and thus creating sales tax nexus. What’s concerning is that an online marketplace seller may have established sales tax nexus many years ago and not even realized it and could be liable for many years of uncollected sales tax.
In the wake of many states passing “Amazon Laws” to try to capture uncollected sales taxes on Internet sales, states have begun looking to businesses who use third-party fulfillment companies for uncollected sales taxes. If and when a state discovers that a business has not been collecting sales tax, but should have been, the state may look-back to when the nexus triggering activity began to collect.
The Multistate Tax Commission (MTC) is offering a special limited-time voluntary disclosure program between August 17 and the new deadline of November 1, 2017 for participating states where businesses may come forward to disclose an estimate of back tax liability to the state for the prior 4 years and in some cases not owe any back taxes.
The participating states are:
- Colorado (with exceptions)
- Nebraska (with exceptions)
- New Jersey
- South Dakota
For eligible and approved taxpayers, most of the participating states will agree to waive sales/use and income/franchise back tax liability, including penalties and interest, for prior tax periods, without regard to any look-back period. However, the taxpayer must register as a seller or retailer to collect, report and remit sales/use tax and begin filing sales/use tax returns and remit sales/use taxes as of the effective date, as indicated in the voluntary disclosure agreement, but not later than December 1, 2017.
If the taxpayer is required to file income/franchise tax returns and paying any tax due, the taxpayer must begin filing in the tax year that the voluntary disclosure agreement is effective, not later than December 1, 2017.
The original article appeared on Peter Sullivan Accounting’s blog site.
About Rachel Le Mieux
Rachel is a partner at Seattle-based CPA firm Peter Sullivan LLP and has been practicing in state and local taxes (SALT) since 1985.