Over the past several decades nexus has been at the forefront of the state and local tax world. Since the Quill ruling in 1992, states have aggressively created ways in which a company can have a sufficient connection to their state. Once the connection, or “nexus,” is made, a state can require a company to charge collect and remit sales tax to it. As the economy has changed more to an online model, states continue to play catchup to get their fair share of the taxes.
Perhaps the most popular issue on a national multi-state tax level is whether a company has nexus with a state if they use the Fulfillment by Amazon (FBA) services. In short, if Amazon houses a company’s inventory in a distribution center, does that inventory create nexus – ie – an obligation for that company to collect and remit taxes to that particular state. That question has been affirmatively answered in most jurisdictions and companies have been blindsided by huge tax obligations often spanning many years.
For those companies that have been living in fear of large tax assessments, a Multi-State Tax Amnesty was recently released by the Multi-State Tax Commission (MTC). Effective August 17, 2017 through October 17, 2017, several states will allowed companies who used FBA programs to come forward and comply. Under the program, if a company complies, the state will forgive back taxes, interest and penalties in exchange for several requirements on a go forward basis. To date, the participating states are:
- COLORADO (income tax liability waiver is limited)
- NEW JERSEY
- SOUTH DAKOTA
- WISCONSIN (back taxes interest from 1/1/15 must be paid)
The basic requirements to be eligible for amnesty include:
- The taxpayer has not registered with the state taxing authority, filed returns, or had any prior contact with the state concerning potential tax liability.
- The taxpayer is an online marketplace seller using a marketplace provide, such as Amazon FBA to facilitate sales into the state and has not property, employees, or agents in the state except for the online marketplace seller’s inventory or other nexus creating actives of the marketplace provider.
- Any taxes collected from customers will be remitted including penalties and interest.
This is an excellent opportunity for companies that offers a full relief of taxes, penalties, and interest in these states. Additionally, if your or your client’s company has potential liability using Amazon’s services, then this is probably the last opportunity you will have to get state tax related issues cleaned up without having to pay the taxes, penalties, and interest. If you have questions or need experienced attorneys to handle the amnesty program for you, then we are here to help.
About the Author: Gerald “Jerry” Donnini II is a partner of the Law Offices of Moffa, Sutton, & Donnini, P.A. Mr. Donnini concentrates in the area of Florida and Federal tax matters, with a heavy emphasis on the tobacco, convenience store and petroleum industries . He also handles a myriad of multi-state state and local tax issues. Mr. Donnini is a co-author for CCH’s Expert Treatise Library: State Sales and Us Tax and writes extensively on multi-state tax issues for SalesTaxSupport.com.