08.28.17 | SALT Chat
In the 1970 film “Love Story”, actress Ali McGraw may have immortalized the line “Love means never having to say you’re sorry.” Many opinions exist whether this is good relationship advice, but I can state with certainty it is bad advice for online marketplace sellers as approximately 28 states have joined with the Multistate Tax Commission (MTC) to offer an extremely generous amnesty program. The program is in place through October 17, 2017.
Online marketplace sellers are those sellers of merchandise who don’t have their own website or even warehousing infrastructure, but use the likes of Amazon or a similar marketplace to distribute and sell their merchandise. So while the seller may not have any contacts or nexus in a taxing jurisdiction, the marketplace provider may very well. States have been successful in attributing the nexus of the marketplace to the seller himself and accordingly attaching all of the sales tax collection obligations and even income franchise tax liability created by the marketplace to the seller.
The simplest example would be if I decided to sell a self-published novel through the internet. Confident in its success, I have 10,000 copies printed and decide to sell and warehouse them with Amazon. While I may be only located in New York, due to Amazon’s presence in essentially every state, the nexus attributed to Amazon now belongs to me and I may very well have an obligation to collect and remit sales tax as well as pay an income tax to all the states where the book is sold and warehoused.
The MTC program is unique in that not only will penalties be waived, but in many cases so will any back tax liability. As usual, the devil is in the details and several key jurisdictions are not willing to give up a limited three or four year look-back period. What the MTC and the participating states are seeking in return is for the seller to register for and collect, remit, and pay taxes on a going forward basis.
The details of the program are available on the MTC website at http://www.mtc.gov/Nexus-Program. If you are a marketplace seller, Berdon can help you navigate this one time opportunity. You can reach me at WBerkowitz@BerdonLLP.com or contact your Berdon advisor.
Wayne K. Berkowitz, a tax partner and head of the State and Local Tax Group at Berdon LLP, advises on the unique requirements of governments and municipalities across the nation.