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‘Clean Slate’ amnesty offered by U.S. for missed sales tax

Date22 Aug 2017

USAIf European businesses wish to take advantage of America’s Multi-State Tax (MTC) sales tax amnesty, they have until 21st October to decide.

America’s MTC sales tax amnesty started on 17th August. This sales tax is the U.S. equivalent of VAT – the funds which must be remitted to the correct tax authority for the sale of goods or services. The difference being, unlike VAT, it is collected by the retailer at the final sale, rather than all the way through the supply chain.

This amnesty has been created to boost future compliance with collection and settlement of sales tax, currently there is a gap with MTC costing billions in lost revenue.

This window of opportunity for retailers to register for sales tax in states where they are holding stock or selling, and they do not have to fear having to pay back any unpaid taxes that could be owed. If there are any penalties or interest payments acquired, these will also be waived. Any European businesses that are selling through online marketplaces, for example, Amazon FBA into the U.S. should be ready to take advantage of this.

The Amazon FBA (Fulfilment by Amazon) and eBay marketplaces drive more than a trillion dollars in annual sales, but their supply nature adds a level of difficulty to the classification of ‘physical presence’ when defining accountability to collect and remit sales tax. Sales tax was announced after the Great Depression in the U.S., but they did not foresee inventory being such a significant trigger of taxable status.

According to laws passed in certain states, it is deemed you have a ‘physical presence’ in that state if you have inventory in a marketplace provider’s warehouse or distribution centre. Inventory is considered to be property, and it was ruled long ago by the courts that property in a state created a link.

This amnesty is a compliance gift, but will leave many sellers with an additional administrative burden to understand and then comply with sales tax obligations. Once sellers are accepted onto the amnesty programme, they will require to register for sales tax in. Sellers will then require to ensure that sales tax is charged on their sales moving forward, and that these taxes are filed with the authorities.

amavat Europe provides a one-stop-shop solution for VAT obligations within Europe. We assist clients with a single point of contact that speaks their language and handles all VAT related issues with a standard and cost efficient approach.

If you have any queries or questions, please do not hesitate to contact amavat Europe.

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