The Multistate Tax Commission (MTC) recently announced a Voluntary Disclosure Program called the Online Marketplace Seller Voluntary Disclosure Initiative. The program seeks to induce remote sellers who use a “marketplace provider/facilitator,” such as Amazon’s “Fulfillment by Amazon” program, to register and prospectively begin collecting sales tax in participating states. In exchange, the 18 participating states will waive all past penalties, and most will waive all tax liabilities and interest as well. The program runs from August 17, 2017, through October 17, 2017. Although the discussion below generally relates to sales/use taxes, the program also applies to income/franchise taxes.

Program Eligibility

Currently, 18 states are participating in the MTC Online Marketplace Seller Voluntary Disclosure Initiative (see Exhibit). To be eligible for the program, an online retailer must be using a marketplace facilitator to facilitate retail sales and, with respect to the states participating in the program—

  • must not be registered as a seller or retailer;
  • cannot have filed sales/use or income/franchise tax returns or been advised that such taxes may be due;
  • must have no physical presence (such as employees or office locations), other than inventory stored at a third-party fulfillment center, located in a participating state; and
  • must agree to register with the state as a seller or retailer and timely begin collecting, reporting, and remitting sales and use tax and filing returns (and income/franchise tax returns, if applicable) not later than December 1, 2017.

Benefits of the Program

The program is not the MTC’s standard Voluntary Disclosure Agreement (VDA) Program, which requires participating taxpayers to file tax returns and pay tax liabilities for a specified number of prior tax years, commonly known as a “look-back period.” It is considerably more beneficial for taxpayers since many of the participating states will waive all prior sales and use tax liabilities, penalties, and interest in exchange for retailers agreeing to register for, collect, and file sales tax returns prospectively.

Note that the benefits of the program will vary somewhat among the participating states. For example, Wisconsin will require payment of back taxes and interest for a lookback period beginning in 2015.

Application Process

To participate in the program, an application must be completed, either online at the MTC’s website or via PDF emailed directly to the MTC, and received by the MTC between August 17, 2017 and October 17, 2017. The application must state that the retailer is applying for voluntary disclosure relief under the Online Marketplace Seller Voluntary Disclosure Initiative, indicate the specific state/s in which a VDA is being sought, and provide complete and accurate disclosure of the information requested in the application. Applications to the program can be made anonymously, and taxpayers will not be required to disclose their identities until the voluntary disclosure agreement is executed.

Note that due to the short-term nature of the program, response times may be shorter than those provided in the MTC’s standard VDA procedures. Additionally, the standard MTC VDA program application is used for the program, which ordinarily requires that a taxpayer have an estimated total tax liability of at least $500; however, there is no minimum tax liability requirement.

Needless to say, the program sets forth an important offer for retailers using third parties to solicit sales or store goods on their behalf. While a number of states have adopted “economic nexus” rules for sales tax reporting, physical presence (i.e., employees, offices, property) remains the nexus standard for sales tax purposes until such time as Quill Corp. v. North Dakota [504 US 298 (1992] is overturned. Where a retailer is using Amazon’s FBA or similar programs, and such third party is storing the retailer’s goods, the physical presence nexus requirement could be satisfied. It is therefore critical that online retailers understand where their goods are being stored, as well as where third parties are soliciting sales on the retailer’s behalf, and complying with the tax reporting rules in specific jurisdictions.


States Participating in the Voluntary Disclosure Program for Online Marketplace Sellers

Alabama Arkansas Colorado Connecticut Florida
Idaho Iowa Kansas Kentucky Louisiana
Nebraska New Jersey Oklahoma South Dakota Texas
Utah Vermont Wisconsin



Corey Rosenthal, JD, is a principal, and Arvinder Kaur, CPA, is a state and local tax manager, both at CohnReznick LLP, New York, N.Y.