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Online Seller Voluntary Disclosure Plan a Great Benefit, But Look Before You Leap

August 09, 2017

In an effort to encourage the collection of sales, use, income and franchise tax, taxpayers who sell through online marketplace arrangements, such as Fulfillment by Amazon, could benefit from a recently conceived voluntary tax disclosure plan offered by the Multistate Tax Commission (MTC). The MTC is an intergovernmental tax agency that represents a variety of states whose goal is to preserve the efficiency and uniformity of multistate laws. 

Start Date
The voluntary tax disclosure plan will begin Aug.17 and allow online sellers to apply for voluntary disclosure and register as a seller/retailer between Aug. 17 and Oct. 17. Some states may also forgive lookback liabilities for various taxes, but it is up to the state to decide whether or not any lookback periods will be waived. 

According to the MTC website, there are currently 16 states participating in the plan.  They are Alabama, Arkansas, Colorado, Connecticut, Idaho, Iowa, Kansas, Kentucky, Louisiana, Nebraska, New Jersey, Oklahoma, South Dakota, Utah and Vermont. Colorado's participation is pending final approval.

Eligibility Criteria

  1. Taxpayer has not registered as a seller or retailer, nor filed returns or paid tax with an applicable participating state.
  2. Taxpayer is an online seller utilizing a marketplace provider or facilitator such as Fulfillment by Amazon.
  3. Taxpayer has made a timely application for entry into the voluntary tax disclosure plan.
  4. Taxpayer agrees to register and pay taxes prospectively in the applicable participating states not later than Dec. 1, 2017.

Anonymous Application
An application to enter the plan is done anonymously, and disclosure of the applying taxpayer is not required to be provided by the MTC until the voluntary disclosure agreement has been signed by all participating parties. In addition, the states participating in the plan have agreed not to disclose to other taxing jurisdictions the identity of any taxpayer entering into a voluntary disclosure agreement under the plan except as required by law, a court order or in response to an inter-governmental exchange of information agreement.

Do Your Homework
It's important to note that the voluntary tax disclosure plan can provide protection and valuable tax relief. However, before applying you should first consult a professional to help avoid mistakes in procedure and in the application, as well as gain a basic understanding of the benefits and potential costs of entering the plan.

For more information about nexus and to learn how your business could benefit from the MTC plan, contact your Eide Bailly professional or a member of our state and local tax team