Tax Group Mulls Marketplace Seller Voluntary Disclosure Plan

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By Tripp Baltz

Sellers who participate in the “Fulfillment by Amazon” program and similar arrangements with other online marketplace providers would be able to make use of a proposed short-term voluntary disclosure period now being weighed by a Multistate Tax Commission committee.

Richard Cram, director of the MTC’s National Nexus Program, told Bloomberg BNA July 20 he is optimistic the committee can get 14 or 15 states to participate in the limited-time voluntary disclosure proposal. The committee recently had four closed sessions on the proposal and will iron out final details during the commission’s annual meeting in Louisville on July 31, Cram said.

Nine states have indicated interest in participating in the proposal, and another 10 are considering participating, according to a July 18 report to the Nexus Committee. The proposal would be made available to online sellers that have nexus with a state as a result of having inventory located in a fulfillment center or warehouse in that state operated by a marketplace provider like Amazon.

Inventory Nexus

Amazon FBA sellers sell merchandise on the website, with Amazon handling the fulfillment, billing, and returns for these sellers. Many sellers don’t collect and remit state sales and use taxes, saying they aren’t required to under the U.S Supreme Court’s 1992 ruling in Quill Corp. v. North Dakota. That ruling said a state can’t compel a vendor to collect and remit sales and use taxes if the seller doesn’t have a physical presence in the state.

FBA sellers typically send their items to Amazon ahead of sales, and Amazon stores them in warehouses and fulfillment centers near customers. As Amazon has opened more warehouses and centers in more states, the FBA sellers have nexus where that inventory is located, Cram said.

Cram said several Amazon FBA sellers expressed strong interest in a disclosure program that would allow them prospective tax compliance along with relief from back tax liability. The proposal would allow sellers to apply to states for voluntary disclosure and register as a seller or retailer between Aug. 17 and Oct. 17.

No Back Taxes

In exchange for doing so, the seller would receive relief from any past due sales/use tax, or income/franchise tax liability, Cram said. “There would be no back tax liability, or penalties and interest, if they registered and began collecting and remitting taxes going forward,” he said.

The committee is expected to work on several remaining questions about the proposal at its July 31 meeting, Cram said. Among them is whether the existing threshold of $10,000 in retail sales is the correct triggering amount for taxpayers to participate in the program, “or whether that volume level ought to be higher or lower,” he said.

Another issue is whether the time frames in the proposal are realistic, he said. “States would certainly like to do this sooner or later, but some have suggested we might push it back to 2018, as these sellers are going to be preoccupied with Christmas” retail sales in the current proposed window, he said.

Lookback Periods

Also, the committee will want to get an idea of which states are interested. “Are they willing to give up total back tax liability, or offer something less than that, like a one- or two-year lookback instead of the typical three- to four-year lookback,” he said.

At present Alabama, Colorado, Connecticut, Florida, Kansas, Kentucky, Louisiana, Utah, and Vermont have expressed interest in participating, he said. Arizona, Idaho, Iowa, Michigan, Nebraska, New Jersey, North Dakota, Tennessee, Texas and Wisconsin are considering it.

To contact the reporter on this story: Tripp Baltz in Denver at

To contact the editor responsible for this story: Jennifer McLoughlin at

For More Information

The draft voluntary disclosure agreement is at

A report on the proposal is at

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