The Multistate Tax Commission offers the unique opportunity for online sellers to commence sales tax collection without fear of assessment for past periods.
The MTC has introduced the online marketplace voluntary disclosure initiative beginning August 17, 2017. This program allows online sellers that use a third-party facilitator to store inventory and fulfill sales outside its home state, such as Amazon FBA. The taxpayer must apply for the program between August 17 and October 17, 2017. Twenty three states have agreed to participate, with nineteen states offering to waive all past due sales / use taxes if the seller agrees to register and begin collecting sales tax prospectively.
Many online sellers using out-of-state companies to fulfill orders do not realize these activities can create substantial nexus for sales tax collection. First, the seller has inventory (i.e., property) stored in the state where the warehouse is located. Additionally, the seller has a representative in the state that is acting on its behalf in fulfilling and shipping orders. Both the presence of property and a representative in the state, if significant enough, will create nexus for sales tax collection purposes.
The MTC’s program offers an extraordinary opportunity for these online sellers to comply prospectively without worrying that registration could trigger an audit for past sales tax periods. Another significant benefit is that the seller can submit its application for the program anonymously through its tax attorney. Please contact us if you need advice regarding where your business may have nexus and whether the MTC’s online marketplace voluntary disclosure initiative is appropriate.