As states continue their quest to compel online vendors to collect sales and use tax on sales to customers located in the state and to subject such vendors to state income tax, a current trend has been targeting vendors selling via online marketplaces. Some states assert that the presence of inventory held for a vendor or the presence of the marketplace provider/facilitator in a state acting on behalf of a vendor is sufficient nexus or connection of the vendor with the state to subject the vendor to the state’s taxing jurisdiction.
The Multistate Tax Commission (MTC), an intergovernmental state tax agency that works on behalf of the states and taxpayers to facilitate the administration of state tax laws, is coordinating a Voluntary Disclosure Settlement program (VDA program) to enable retailers that sell their products online using a third-party marketplace provider/facilitator (such as Rakuten) to register with a state for current and prospective tax compliance and at the same time settle tax obligations for prior years.
The settlement program is designed for online sellers that derive nexus with states for tax purposes as result of the presence of their inventory in a fulfillment center in a state and/or other activities performed on their behalf in a state by the online marketplace provider/facilitator.
The VDA program covers sales/use and income/franchise taxes for participatory states and is open until October 17, 2017. Sellers are allowed to apply for voluntary disclosure on an anonymous basis and will not be required to disclose their identity to the state until the seller registers with the state and the voluntary disclosure agreement is executed.
Additionally, states participating in this VDA have agreed not to disclose the identity of any taxpayer to other taxing jurisdictions entering into a VDA. While the terms of the program vary among the participating states and the types of taxes involved, the program generally offers a vendor the ability to limit penalties and the period of prior years (the lookback period) which a state will retroactively seek to assess tax.
Visit the Online Marketplace Seller Voluntary Disclosure Initiative to learn more about the program and each state’s specific requirements.
Tammara Langlieb's practice concentrates on the federal tax planning aspects of a multitude of transactions. She is also actively involved in revising and editing a treatise on Tax Planning for Real Estate Transactions by Stefan Tucker, Esq. In addition, Ms. Langlieb's practice is centered around the tax analysis relating to tax-exempt financing, including assisting clients in taking advantage of tax-exempt financing possibilities and drafting documents to assure a tax-exempt entities compliance with federal regulations.
Walter Calvert focuses on public finance, project finance, federal, state and local taxation, and exempt organizations. As tax counsel in municipal financing transactions, Mr. Calvert advises issuers and conduit borrowers in connection with new issues and restructurings of existing issues. His experience includes financings for governmental issuers, 501(c)(3) organizations, manufacturing and other exempt facilities, and housing bonds.