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Amnesty Under
The Streamline Sales Tax Agreement 2-17-06
The Streamlined
Sales and Use Tax Agreement ("Agreement") became effective on October
1, 2005. The Agreement offers taxpayers potential relief from prior exposure
related to failure to collect Sales & Use tax in Streamlined Sales Tax
("SST") member and associate members states. To qualify for such
benefits however, taxpayers must agree to collect and remit applicable Sales
& Use taxes in all of the full member states even if they do not have a
legal obligation to do so. They may opt to also collect Sales & Use Tax in
the associate member states. In deciding whether to register for SST, taxpayers
must carefully weigh the expected amnesty benefits against the ongoing costs
and burdens associated with a potentially significant surge in compliance
burden.
A full member
state is one that is in compliance with requirements set forth in the Agreement
and has been approved by the Governing Board. The current member states
include: Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, New
Jersey, North Carolina, North Dakota, Oklahoma, South Dakota, and West
Virginia. An Associate member state is a state that is found to be in
compliance with the Agreement, although changes to their statutes and rules are
not in effect, but are scheduled to take effect on or before January 1, 2008.
The state shall automatically become a Member State upon the effective date of
the conforming legislation. The current associate member states include:
Arkansas, Ohio, Tennessee, Utah, Wyoming and Nevada.
Each member state
whether a full member or an associate member is required to provide amnesty to
a registered Seller under the Agreement. The amnesty period begins the date the
state became a full member state until 12 months after becoming a member. For
states that became members on 10/01/05 the amnesty period ends 09/30/06. Such
amnesty will preclude assessment for uncollected or unpaid sales or use taxes,
together with penalties and interest for the period the Seller was not
registered in the state. However, there are certain restrictions. A Seller must
register within the 12 month period a state becomes a full member in order to
receive such amnesty. On the other hand an associate member state must provide
amnesty from the time it joins as an associate member until 12 months after it
becomes a full member. Thus an associate member's amnesty period will vary in
time.
In order for a
Seller to be eligible for such amnesty the Seller must remain registered and
continue collecting taxes for 36 months in a member state or risk the amnesty
being voided by the state. It is unclear at this time if such amnesty would be
potentially voided in all the states due to lack of maintaining registration
and collection in one member state. A Seller is not eligible for amnesty in a
member state if the Seller was registered in the member state for the 12 month
period preceding the effective date of the state's participation in Agreement
or has received notice of an audit by the member state and the audit is not yet
fully resolved.
Amnesty is not
available for sales and use taxes that have already been paid or remitted to a
state, to taxes collected and not remitted by the Seller, and to sales and use
taxes due from a Seller in its capacity as a purchaser. The amnesty only
applies to sales and use taxes and does not extend to other types of taxes such
as income/franchise taxes. Due to these limitations it is wise for a company to
assess their potential tax liability for all types of taxes in each of the
member states before deciding whether to register under the Agreement. If a
company determines they have exposure in a member state they may have the
option of entering into a voluntary disclosure agreement ("VDA") with
the state to resolve any outstanding liability issues pertaining to taxes other
than Sales and Use. The benefits would allow the Seller to remain anonymous
while negotiating a settlement, provide a limited look back period, and
abatement of penalties and interest, depending on each state's laws. Once these
VDAs are in place then the Seller is in a better position to register under the
agreement. As the time period to obtain amnesty is limited some states are
willing to expedite the processing of any VDA if the business indicates that it
is considering registering under the Agreement.
However, it is
important to note that not all provisions of the Agreement are up and running.
For example, under the Agreement each Seller must select the certified
technology model it will be using. The two models of interest here are as
follows: Model 1 which allows the Seller to select a Certified Service Provider
("CSP"), who is an agent certified under the agreement who will
perform all the Seller's Sales and Use Tax functions, and Model 2 which allows
a Seller to select a Certified Automated System ("CAS"), which
consist of software certified under the Agreement to calculate the appropriate
tax for which the Seller will remit. Both these models have to be certified by
the Governing Board of the agreement; however, this has not happened to date.
Therefore, many states have postponed a registered Seller's collection
responsibilities until a CSP or CAS is in place, further they will be offering
amnesty for 12 months from the date on which the Governing Board makes the
certifications. However, please note that some states do require collection to
start immediately and will not be extending the amnesty offered under the
agreement.
Source:
CCH Incorporated and the Streamlined Sales and Use Tax Project website:
www.streamlinedsalestaxes.org/Amnesty.html. The information provided is for
informative purposes only and could change as the Agreement is modified and
other issues are resolved by the Governing Board. Should you have questions or
require further assistance please contact an Olivier & Associates Sales and
Use Tax professional.
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