State and Local Tax Alert - August 2017

August 2017

Multistate Tax Commission’s Marketplace Provider Voluntary Disclosure Initiative

 

Summary

As our recent SALT Alert surveyed, states are aggressively targeting remote sellers for sales and use tax collection, audit, and other compliance burdens.  One such area of focus is aimed at remote sellers that use “marketplace providers” or “facilitators” to make sales into states where the remote seller has no physical presence.  States, beginning with Minnesota and Washington, are contending that the presence of the marketplace provider or its inventory at another third party’s warehouse in the state constitutes a physical presence for the remote seller.  And now the Multistate Tax Commission (“MTC”) has announced its “Online Marketplace Seller Voluntary Disclosure Initiative” that it will administer on behalf of 24 states        


Details

The MTC’s National Nexus Program has announced that it will offer a voluntary disclosure initiative in which the following states will participate:  Alabama; Arkansas; Colorado; Connecticut; District of Columbia; Florida; Idaho; Iowa; Kansas; Kentucky; Louisiana; Massachusetts; Minnesota; Missouri; Nebraska; New Jersey; North Carolina; Oklahoma; South Dakota; Tennessee; Texas; Utah; Vermont; and Wisconsin (the “participating states”).  Since the start of the MTC’s initiative, seven additional states have joined to participate to bring the current total number to 24.  It is possible that additional states will join.  Applications to participate must be received by the MTC from August 17, 2017 through October 17, 2017. 
 
The following eligibility criteria apply:
 
  • The taxpayer is not registered as a seller or retailer and has not filed sales and use tax returns or income/franchise tax returns with a participating state, has not made payments of such taxes to a participating state, or had any prior contact with a participating state concerning liability or potential liability for sales and use taxes or income/franchise taxes;
 
  • The taxpayer is an online seller that uses a marketplace provider or facilitator to facilitate retail sales into one or more participating states and has no physical presence of its own with the state (except for the presence of the online seller’s inventory stored in a third-party fulfillment center located in the state or “other nexus-creating activities” of the marketplace provider or facilitator);
 
  • The taxpayer timely applies electronically to one or more participating states for voluntary disclosure relief using either the online application provided at www.mtc.gov or the MTC PDF application form available on the MTC website and emailed to MTC staff at nexus@mtc.gov.  The taxpayer must state in the application that it is applying for voluntary disclosure relief under the MTC’s “Online Marketplace Seller Voluntary Disclosure Initiative,” and provide complete and accurate disclosure of the information requested; and
 
  • The taxpayer must request relief from any past sales and use taxes, including interest and penalties, and any past due income/franchise taxes (if applicable), including penalties and interest, and agree to register as a seller or retailer and begin collecting and remitting sales and use taxes and to file applicable returns on a prospective basis beginning not later than December 1, 2017.  If the taxpayer is subject to income/franchise taxes, it must agree to begin timely filing income/franchise tax returns and pay any such taxes that are due beginning with the taxable year that includes December 1, 2017.
 

BDO Insights

  • Online sellers are permitted to apply for participation in the MTC’s “Online Marketplace Seller Voluntary Disclosure Initiative” on an anonymous basis and will not be required to disclose their identity until the taxpayer registers with the state and the voluntary disclosure agreement is executed.
 
  • In addition, the application can be withdrawn with respect to any participating state at any time prior to execution of the voluntary disclosure agreement.      
 
  • The MTC’s “Online Marketplace Seller Voluntary Disclosure Initiative” is a true tax amnesty.  As a result, the payment of back tax and interest for prior “lookback” periods is not required (with the exception of Wisconsin, which will require the payment of back tax liabilities and interest for the following “lookback” periods:  sales/use tax, commencing January 1, 2015 and income/franchise tax, tax years 2015 and 2016.)  
 

For more information, please contact one of the following practice leaders: 

 
West:     Southeast:
Rocky Cummings
Tax Partner
 
    Scott Smith
Tax Managing Director
 
Paul McGovern
Tax Managing Director
 
    Tony Manners
Tax Managing Director
 

   
Northeast:     Southwest:
Janet Bernier
Tax Principal
 
    Tom Smith
Tax Partner
 
Matthew Dyment
Tax Principal
 
    Gene Heatly
Tax Managing Director
 

   
Central:     Atlantic:
Nick Boegel
Tax Managing Director
 
    Jonathan Liss
Tax Managing Director
 
Joe Carr
Tax Partner
 
    Jeremy Migliara
Tax Managing Director
 
Mariano Sori
Tax Partner
 
    Angela Acosta
Tax Managing Director
 
Richard Spengler
Tax Managing Director