Editor’s Note: This guest blog post comes courtesy of Gail Cole with Avalara.
Despite having the best intentions, businesses sometimes make mistakes when it comes to filing sales tax. They may apply the wrong rate to a sale, treat a taxable transaction as exempt, or file a return late — or not at all. No matter what the error or the reason, even small mistakes can lead to big penalties.
From time to time, states offer tax amnesty programs and voluntary disclosure agreements to encourage businesses to come clean with state tax authorities, correct errors, and pay minimal penalties and interest. If only they happened more often.
State legislatures normally establish these programs, determining when they occur, how long they last, and which taxes are eligible for amnesty. Fortunately for retailers, sales and use taxes usually are. State departments of revenue usually administer the programs.
Tax amnesty programs are designed to encourage non-compliant taxpayers to become fully compliant. They generally aren’t open to individuals or businesses that aren’t already residents or doing business in the state. The state generally waives some or all the penalties and interest due for taxpayers who successfully fulfill the terms of the amnesty (i.e., pay what they owe).
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Although in theory tax amnesty programs could occur at any time, they don’t. They typically run anywhere from 30 to 90 days.
In 2017, only three states offered tax amnesty programs: Connecticut, Pennsylvania, and Rhode Island. Ohio offered a tax amnesty program at the start of 2018, and Texas provided one from May 1 through June 29, 2018. There are a few more to come this year:
- Alabama (July 1-September 30)
- Connecticut (October 31, 2017-November 30, 2018)
- New Jersey (dates to be determined but must end by January 15, 2019)
Voluntary disclosure programs
Voluntary disclosure programs are different. They’re for businesses that should be registered with the state and filing taxes, but aren’t (e.g., online sellers that haven’t been collecting taxes on their sales into the state).
Last fall, approximately 25 states participated in a multistate voluntary disclosure program for online marketplace sellers. A less generous but ongoing multistate voluntary disclosure program is available through the Multistate Tax Commission.
This year, Indiana is offering a one-time, voluntary disclosure agreement for online and marketplace sellers. It started May 2, 2018, and runs through December 31, 2018.
Avalara helps businesses of all sizes achieve compliance with transactional taxes, including sales and use, VAT, excise, communications, and other tax types. The company delivers comprehensive, automated, cloud-based solutions that are designed to be fast, accurate, and easy to use.