News and Insights

Companies Urged to Participate in Streamlined Sales Tax Amnesty Program

Tax Development Sep 05, 2006

Businesses Complying by September 30 Deadline Will Avoid Tax, Interest and Penalties

Companies that have not collected or remitted sales taxes in 13 states are advised to participate in an amnesty program that will end September 30th. The program was created under the Streamlined Sales and Use Tax Agreement; companies can avoid having to pay sales tax, interest and penalties on uncollected sales taxes.

The Streamlined Sales and Use Tax Agreement is a multistate agreement designed to radically simplify sales and use tax collection and administration by retailers and states. The agreement established a one-year amnesty period for companies owing taxes in participating states when it went into effect on Oct. 1, 2005.

“Whether you have sales of $1 million or $500 million, your liability can be substantial,” said Jeremiah T. Lynch, a Principal of Ryan & Company. “A company can owe tax of seven-to-eight percent or more on all sales made into a participating state. Adding interest and penalties, companies with low profit margins could see their entire profit margin wiped out.”

Companies affected by the Sept. 30 deadline are those doing business in Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, New Jersey, North Carolina, North Dakota, Oklahoma, South Dakota and West Virginia.

In general, companies liable for sales tax collection and payment are those that have established “nexus” in a state as a result of having sales or service personnel there or employing third-party contractors. “Many companies may not be aware that having an independent sales force in a state, or people who train customers there, creates nexus for sales and use tax purposes,” said Lynch.

The simplified system established under the Streamlined Sales and Use Tax Agreement reduces the number of sales tax rates, brings uniformity to definitions in the sales tax base, reduces paperwork for retailers, and incorporates new technology to modernize many administrative procedures.

The amnesty program requires that a seller must maintain its registration and continue to collect and remit applicable sales and use taxes for at least 36 months after the date of registration in a member state.

“There are literally thousands of companies affected by the agreement, and this is one of the best amnesty programs ever instituted” said Lynch. “Come the end of September, I believe those companies on the outside looking in will wish they had chosen to participate.”