Multistate Online Sellers Voluntary Disclosure

Multistate – The Multistate Tax Commission and the National Nexus Program is offering a special limited-time voluntary disclosure initiative, in which the following states are participating:

  • Alabama
  • Arkansas
  • Colorado
  • Connecticut
  • Florida
  • Idaho
  • Iowa
  • Kansas
  • Kentucky
  • Louisiana
  • Nebraska
  • New Jersey
  • Oklahoma
  • South Dakota
  • Texas
  • Utah
  • Vermont
  • Wisconsin

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 October 17, 2017, from taxpayers meeting the following eligibility criteria:

  1. The taxpayer has not yet registered as a seller or retailer, filed sales/use tax or income/franchise tax returns with, made payments of such taxes to, or had any other prior contact with the state concerning liability or potential liability for sales/use taxes or income/franchise taxes.
  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 physical presence nexus in the state, except for the online marketplace seller’s inventory stored in a third-party fulfillment center located in the state or through 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 electronically (using either the online application or  PDF application form and emailed to MTC staff at email address nexus@mtc.gov) to the state for voluntary disclosure relief through the MTC Multistate Voluntary Disclosure Program (MVDP), in accordance with the process set forth.  The taxpayer will need to 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. Note: The application form requests that the applicant provide an estimate of back tax liability to the state for the prior 4 years and contains the statement:  “National Nexus Program staff will not process an application when the good-faith estimate for all tax-types for the lookback period is less than $500 in this state.”  Please be advised that applications received under this special time-limited online marketplace seller voluntary disclosure initiative will be processed, even when estimated back tax liability is less than $500.  Also, response times permitted in this initiative may be shorter than those provided in the MTC Procedures for Voluntary Disclosure, in order to ensure that the taxpayer timely complies with Paragraph 4 below.
  4. The taxpayer is seeking relief from any past due sales/use tax, including interest and penalties, and 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 prior to 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, then the taxpayer agrees to remit such tax to the state, including penalties and interest.
  5. As provided in the MTC Procedures of Multistate Voluntary Disclosure, 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 is executed.  The taxpayer may choose which state and which tax type (sales/use tax, income/franchise tax or both) to seek voluntary disclosure relief for.  The taxpayer can also withdraw the application for voluntary disclosure with any state at any time prior to execution of the voluntary disclosure agreement.

Normally, when a taxpayer applies for voluntary disclosure relief with states through the MTC MVDP, the taxpayer will be required to file returns and pay back tax liability, plus interest, for the lookback period that the state uses, which is generally the prior three to four years or more, depending on the state’s law or policy.  The state will then waive tax liability, interest and penalties for the time period prior to the look back period. Under the special time-limited initiative described above, for taxpayers meeting the above criteria, the states identified above (unless otherwise indicated) will agree to waive sales/use and income/franchise back tax liability, including penalties and interest, for prior tax periods, without regard to any lookback period, provided the taxpayer registers as a seller or retailer to collect, report and remit sales/use tax and commences to file sales/use tax returns and remit sales/use tax as of the effective date (not later than December 1, 2017) set forth in the voluntary disclosure agreement, and if the taxpayer is subject to income/franchise tax, the taxpayer commences filing income/franchise tax returns and paying tax due, commencing with the tax year that includes the effective date of the voluntary disclosure agreement (not later than December 1, 2017).

Note: 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 look back period will be limited to prior years during which the marketplace seller had nexus.

The 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 under this special time-limited initiative, except as required by law, pursuant to a court order, or in response to an inter-government exchange of information agreement in which the requesting entity provides the taxpayer’s name and taxpayer identification number. Blanket requests from other jurisdictions for the identity of such taxpayers will not be honored.

Online Marketplace Seller Initiative

About Davis & Davis LLC – Sales Tax Experts: Headquartered in Dallas, Texas, Davis & Davis LLC – Sales Tax Experts specializes in sales/use tax refund recovery and audit defense. Our team of consultants is comprised of former Big 4 sales tax consultants and state sales tax auditors. Each of our consultants has 15 to 20 years of experience, providing our clients with access to a highly specialized team of sales/use tax professionals. At Davis & Davis, we are committed to maintaining the highest standards in our talent pool. We work hard to meet our clients’ needs by ensuring that you view our firm as an extension of your company and a member of your team.

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