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Rare tax amnesty offer ends May 31
By David Olivier, Inside Business - Hampton Roads (VA), May 21, 2007
A sales tax amnesty deadline is quickly approaching for Hampton Roads businesses that have extended their reach into other states.
Whether it was the strong economy or the ever-increasing popularity of Internet sales, many Hampton Roads companies expanded into multiple states. To state revenue departments, the economic explosion meant uncollected sales tax revenues
and more audit candidates.
In an effort to get companies to register and collect sales tax appropriately, many states joined together in October 2005 and launched the Streamlined Sales Tax Agreement to provide a one-time amnesty to companies that registered and
came into compliance with state sales and use tax laws where they do business.
The following states participate in the SST Agreement and will end their tax amnesty May 31: Indiana, Iowa, Kansas, Kentucky, Minnesota, New Jersey, North Dakota, Oklahoma, South Dakota, and West Virginia. Nebraska has extended amnesty
until July 31, Rhode Island and Vermont until Dec. 31.
Arkansas, Nevada, Ohio, Tennessee, Vermont and Wyoming are also offering amnesty as participants of the SST Agreement. Amnesty in these states will continue to be available until one year following the dates in which theses states are in
full conformity with the agreement.
Although Virginia is not one of the SST states, businesses from the commonwealth that have multistate sales are eligible for the amnesty in any or all of the SST states.
Businesses unaware of their sales tax obligations in other states could eventually face huge tax payments and penalties when auditors catch up to them. The fact that state revenue departments nationwide are improving their technology and
the ability to coordinate with other states makes matters worse for businesses skirting the law knowingly or unknowingly.
Virginia is currently undergoing a $2 billion modernization of its antiquated IT infrastructure. One result of these upgrades will allow the Virginia Department of Taxation to better track sales and use tax matters from state-based
business as well as out-of-state businesses. Other states have already upgraded their technology or are following suit.
Any Hampton Roads business owner who is unregistered and has nexus and a history of sales into the Streamlined Sales Tax states potentially stands to benefit immediately from the amnesty offer and should recognize the opportunity to get
into compliance without incurring any back sales taxes and related penalties and interest.
Those who do not apply for the amnesty will not experience any pain until they get caught, and that pain could be tremendous. In some cases it may even put them out of business.
I have worked with many companies who have unknowingly created a sales and use tax filing obligation in various states and created material amounts of liabilities. Many of these companies innocently sent sales representatives, employees
or agents into states to sell their products and services, thus creating nexus.
After completing an analysis of each company's business model and exposure, it was determined the best way to limit past exposure for some of these companies was to register with the SST Agreement. By doing this the companies were able to
save hundreds of thousands in sales tax liability, penalties and interest.
It should be noted that there are some draw backs to the SST Agreement (i.e., assumption of an ongoing multistate filing obligation), and it may not be for everyone. Companies should make a careful evaluation of their situation to see if
SST registration is the right exposure resolution option for them. There are often other alternatives available that allow proactive taxpayers to limit the prior look-back period and minimize interest and penalties.
One way or the other, for businesses that have extended their reach into other states, it's better to pay now than to get caught years down the road and cripple the business with a huge tax bill.
David Olivier is the founder and Managing Principal of Olivier & Associates on Wall Street. The firm specializes in Sales & Use Tax. David can be reached at 888-466-2829 or www.oatax.com.
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