One of the most common questions about State and Local Tax facing anyone doing business in multiple locations is whether they even have to collect a state’s sales tax in the first place. The short answer, but not necessarily a clarifying answer, is that a business must collect sales tax when that business has nexus with the state in question. Questions of nexus and the limit of a state’s ability to require an out-of-state business to collect sales tax have been central to much litigation.
In an attempt to reach out to some of these out-of-state sellers, the Multistate Tax Commission (MTC) has announced a Sales Tax Amnesty for businesses that have participated in a “fulfillment by Amazon” (FBA) agreement and could potentially have nexus in multiple states as a result of these other activities. Presently fifteen states are joining in the amnesty, but eight additional states have until August 17, 2017 to join in.
Sales Tax Amnesties are not necessarily uncommon, in fact there have been several through the MTC since 2016, but the potential benefit of this program is that through the MTC’s National Nexus Program, businesses could file one application for multiple states instead of filing separately for each state in which they have nexus. Additionally, the program offers the ability to step up and register in these states to avoid any “Look-Back” for historic penalties or tax liability.
The Amnesty will last from August 17, 2017 through October 17, 2017. Businesses who are concerned about whether they have nexus through the FBA or other activity should speak to a tax professional to discuss nexus generally and the benefits and downfalls of this program .