Seeking a Tax Amnesty
A state sales tax amnesty offer could be on its way to your state soon. The program is part of the national Streamlined Sales Tax Project, or SSTP, which is designed to simplify and modernize sales and use tax collection and administration.
The amnesty program is expected to take effect once SSTP receives approval in enough states to represent 20 percent of the total population of the states where a sales tax is imposed. Forty-five states and the District of Columbia currently impose sales and use taxes. Under SSTP's amnesty plan, companies would receive a waiver of liability for previously uncollected or unpaid sales taxes in exchange for a pledge to begin collecting taxes in each participating state where they make sales.
Tax amnesty efforts are gaining popularity as cash-strapped states attempt to collect unreported, unpaid or under-paid taxes. California's recent amnesty program, which ended in March, added more than $188 million to the state's general fund, with an additional $637 million in promised payments expected.
The SSTP amnesty offer could be particularly beneficial to businesses that find themselves with unpaid taxes in several states. Under the plan, companies would register to collect and pay sales tax in participating states in which they make sales without concerns over prior taxes owed. After registering, businesses would also receive amnesty on any unpaid taxes from new states that decide to join SSTP.
The amnesty plan, however, will not be available to businesses already involved in a tax audit regarding sales or use taxes. Once a company is accepted into the amnesty program, it must be ready to handle collections in participating states where it makes sales. Tax experts say this may be a daunting task for unprepared small and midsize firms, so it's best to outsource the job to an expert.
Once you have registered in an amnesty program, all sales tax issues your company faces in the future will be under state scrutiny, says Paul N. Gada, senior small-business tax analyst with CCH Business Owner's Toolkit, a division of CCH Tax and Accounting in Riverwoods, Illinois. Nevertheless, clearing up unresolved sales tax liabilities may be well worth the greater scrutiny for many entrepreneurs, he says.
To stay abreast of state amnesty programs, regularly check your state's department of revenue website for announcements.
Great Falls, Virginia, writer Joan Szabo has reported on tax issues for 18 years.