The Senate passed Market Fairness Act ("MFA" or "Internet Tax") on May 6, 2013, but, the proposed legislation is languishing in the House. Will it pass? No one knows.
What we do know is whether MFA passes or not, sales tax nexus will remain a complicated issue. Additionally, states budgets are tight so they have been busy passing more aggressive nexus laws. Whether MFA passes or not, nexus will be an issue for the foreseeable future for businesses.
The worst time to find out that your business has nexus in a state is when a state is inquiring about the company's business activities. At this point your options
are limited. When it comes to nexus, it is better to be proactive rather than reactive. For those who are proactive,
there are voluntary disclosure programs that can limit the amount of the company's exposure by reducing the look back period, abate the penalty, and a few states abate some or all of the interest. Here are proactive action steps that businesses can take to protect themselves:
What we do know is whether MFA passes or not, sales tax nexus will remain a complicated issue. Additionally, states budgets are tight so they have been busy passing more aggressive nexus laws. Whether MFA passes or not, nexus will be an issue for the foreseeable future for businesses.
Step One: Determine if you have nexus
Step Three: Determine your exposure.
Step Four: Evaluate your options.
Once you have completed the first three steps it is time to choose a course of action that works best for you. If company's exposure is minimal and you don’t anticipate a lot of sales in the future, you may choose to do nothing. If the company's exposure is minimal; but, you expect sales will grow in a state you may choose to do a normal registration and pay outstanding tax, penalty and interest. However if the company's exposure is significant then you
will probably want to use a mitigation program like an amnesty or a voluntary disclosure agreement (VDA) to resolve the issue.
Summary
Nexus is and will be vitally important whether or not the MFA passes, and it pays to be proactive. When it comes to nexus, if you are not proactive, then you may be setting company up for large tax bill. This is what happens when a state finds businesses years later and asserts the company has nexus. When that happens the business may be subject to paying taxes plus penalties and interest. This is a tragedy because if business knew it’s nexus it a state it could have registered and its customers would have paid the tax. Do not hesitate to contact me at 954.599.5985 or klake@bpbcpa.com if you have any questions on Marketplace Fairness Act or sales tax nexus.
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