Twenty states and Washington DC have banded together under the auspices of the Multistate Tax Commission (MTC) to offer sales tax amnesty to online marketplace sellers. What does that mean? In other words, if you have sales tax nexus due to using a 3rd party fulfillment service like Fulfillment by Amazon then you may be able to get off the hook for any back taxes that you owe.
This is seen as a win/win for the states and for Amazon FBA sellers who may not have realized their sales tax liability, or who did realize they have sales tax liability but were worried about becoming compliant due to the fact that they would owe a large amount in past due sales tax, interest, and other penalties.
The amnesty will run from August 17, 2017 to October 17, 2017.
The participating states are:
- Colorado (upcoming Amazon state; Colorado will waive sales and use tax, but will notwaive income tax if you also owe back income tax. Read more here.)
- Connecticut (Amazon state)
- Kansas (Amazon state)
- Kentucky (Amazon state)
- New Jersey (Amazon state)
- South Dakota (with provisions; read more here)
- Texas (Amazon state)
- Utah (upcoming Amazon state)
- Washington DC (may have a look back period, read more here.)
- Wisconsin (Amazon state, with provisions including a limited look-back period. Read morehere.)
To take advantage of the amnesty, a seller should fill out an application at the MTC website.
Keep in mind that you are not eligible for the amnesty if you are already collecting and paying sales tax in a state, or if that state has ever contacted you about sales tax in the past.
Should your business take advantage of the sales tax amnesty?
It’s up to you to decide whether to take advantage of this amnesty. The best thing you can do is have a look at your numbers, assess your liability and decide if you’d like to apply.
Here’s what you need to know:
- What is your past due sales tax liability in these states? – The amnesty is a great deal for any seller who has past due sales tax liability. However, if your sales tax liability is very small and you weren’t planning to collect sales tax in a state, you may not want to take advantage. To figure out what to do, determine how much back sales tax you owe in each state. You can do this via TaxJar.
- Would paying this liability plus penalties and interest break your business? – When determining your past due sales tax liability, be sure to take interest and penalties into account. Should a state later find you and demand past due sales tax, they’ll also charge penalties for each time you didn’t file and interest on the amount due. Every business is different, but assess this risk and determine if potential back taxes, fines and penalties due would bust your bottom line and seriously harm your business.
To help you with your research, you can read more about “when to register for a sales tax permit” here.
I hope this post has helped explain the upcoming sale tax amnesty. If you have questions or comments, feel free to ask over at our Sales Tax for eCommerce Sellers Facebook Group.
- Read the Multistate Tax Commission’s info all about the amnesty
- Read our FAQ all about the amnesty
- Check out a webinar with sales tax expert Mike Fleming of Peisner Johnson with a long Q&A about the amnesty
Author Jennifer Dunn is Chief of Content at TaxJar, a service that makes sales tax reporting and filing simple for more than 9,000 online sellers. Try a 30-day-free trial of TaxJar today and eliminate sales tax compliance headaches from your life!