As a by-product of the Supreme Court's Wayfair ruling, more companies are focusing on getting into compliance, while states encourage this behavior by administering amnesty programs.
When businesses become delinquent on their taxes, they often accrue penalties and interest with the states. During these amnesty programs, states may waive penalties and/or interest. States administer amnesty programs because they want companies doing business in their state to be compliant and in the process collect the revenue.
Current Amnesty Program in Indiana
The Indiana Department of Revenue (DOR) is offering a Voluntary Disclosure Initiative (VDI) for Online Sellers that started on May 2 and runs through December 31, 2018. According to the Department, this special VDI is tailored to meet the unique needs of retailers that have inventory located in third-party Indiana warehouses and sell to Indiana customers, explaining that many of these retailers selling goods to Indiana customers through service providers have both income and sales/use tax obligations in Indiana.
It offers out-of-state retailers the opportunity to enter into a voluntary disclosure agreement (VDA) with unique terms, including a limited look-back period and waiver of underlying penalties. Qualifying participants of this VDI potentially may receive a limited look-back of:
- One full calendar year (2017) plus the current period for state sales and use tax purposes
- Calendar or fiscal year 2017 for state income tax purposes
Current Amnesty Program in New Jersey
New Jersey recently passed legislation requiring an amnesty program with the potential waiver of 100 percent penalties and 50 percent interest. This legislation was signed into law on July 1, 2018, and is effective immediately. This new law requires the New Jersey Division of Taxation to establish a tax amnesty program that must last for at least 90 days and must end no later than January 15, 2019.
This program applies to state tax liabilities for returns due on or after February 1, 2009 and prior to September 1, 2017. This amnesty program applies to most taxes administered by the Division of Taxation.
Other Current Programs
Alabama also has an active amnesty program. This program concludes on September 30, 2018. This program applies to all taxes administered by the Alabama DOR except for motor fuel, motor vehicle and property taxes. Benefits of this program include the waiver of penalties and interest. It also applies to all taxes prior to January 1, 2017.
Connecticut currently has an amnesty program that ends on November 30, 2018. It is for taxes due on or before December 31, 2016. This program applies to most taxes, including state corporate income and sales and use taxes. The benefits of this program include the waiver of penalties and 50 percent interest.
What’s on the Horizon?
As the states become more focused on economic nexus in light of Wayfair, we expect more states to consider amnesty programs or other relief. South Carolina is set to launch an amnesty program in the future. The dates of this program have not been established yet. However, amnesties will be granted to taxpayers who:
- Request an amnesty form and voluntarily file all delinquent tax returns and pay in full all taxes due
- Voluntarily file an amended tax return to correct an incorrect or insufficient original return and pay all taxes due
- Voluntarily pay in full all previously assessed tax liabilities due within an extended amnesty period as determined by the department.
The department may set up installment agreements so long as all taxes are paid within this period. Stay tuned for more details on other states that will be administering amnesty programs or other post events related to the Wayfair decision.
Act Smart and Fast
With all the establishment of these amnesty programs, it is a good time for companies to evaluate their situations (e.g., determining if your company has nexus or not) and whether it’s more beneficial to participate in amnesty or whether a traditional Voluntary Disclosure Agreement (VDA) with states where you may have nexus may be more advantageous.
We recommend to our clients that it’s not a good idea to act with haste. If you have any doubts about your company’s multistate tax filing situation, consult with a sales tax professional about your situation before acting on it.
About Monika Miles
Monika founded Miles Consulting Group in 2002. The firm focuses on multi-state tax consulting—helping their clients navigate state tax issues such as sales tax and income tax in interstate commerce, including e-commerce.