States Are Offering Tax Amnesty to Ecommerce Business Before They Drop the Hammer

Online store owners are facing huge tax bills but some have been given a brief window to get out from under it.

learn more about Tor Constantino

By Tor Constantino • Sep 9, 2017 Originally published Sep 9, 2017

Hero Images | Getty Images

Opinions expressed by Entrepreneur contributors are their own.

Largely untapped sales tax revenue from ecommerce transactions is becoming a funding focus for state tax commissioners as many state governments wrestle with rising healthcare, infrastructure and operating costs, coupled with flat or declining federal funds and stagnant state income tax inflows.

Since the National Conference of State Legislatures estimated as much as $26 billion in online sales tax monies went uncollected in 2015, all state tax agency have been committed to efforts to capture that cash. Many are dedicating personnel and technology to recover owed sales tax revenue for as far back as four years. If you own an online storefront but did not capture those transaction costs from your customers along the way, you will eventually be responsible to pay. However, almost half of the states are taking a temporary break from that taxing activity -- for now.

Since August, a quasi-governmental coalition of taxation agencies across 24 states has instituted a temporary tax amnesty program for ecommerce businesses.

Related: Your Ecommerce Business Might Owe a Ton of Taxes You Don't Know About

"Typically, online storefront owners are responsible to pay the total amount of back taxes, penalties and interest accrued for the entire look back period, even if the owner voluntarily steps forward and notifies the state agency that required sales tax has not been collected," said Ned Lenhart, chief knowledge officer at Ampersand Accounting, a leading consulting firm that specializes in sales tax management and compliance for ecommerce retailers. "Based on the size of the individual ecommerce store, that sales tax bill can be tens or hundreds of thousands of dollars. That size of a liability could put someone out of business."

Lenhart says that states participating in this amnesty program have agreed to "...totally forgive the entire tax bill, interest and penalty..." but only through voluntary disclosure applications made through October 17, 2017.

"What makes this amnesty program unique is that the member states of the Multistate Tax Commission have not only agreed to forgive the sales tax liability estimate for the look back period, they will also forgive the estimated income tax associated with those online sales for the same period. This is an once-in-a-lifetime opportunity for ecommerce business owners but the clock is ticking to take advantage," said Lenhart.

However, Lenhart stressed that ecommerce entrepreneurs should not go it alone. He said this unprecedented opportunity has filing, registry and eligibility nuances that require expert attention to leverage and maximize it.

Tor Constantino

Former Journalist, Current PR Guy (wielding an MBA)

Tor Constantino is a former journalist, consultant and current corporate comms executive with an MBA degree and 25+ years of experience. His writing has appeared across the web on Entrepreneur, Forbes, Fortune and Yahoo!. Tor's views are his own and do not reflect those of his current employer.

Related Topics

Editor's Pick

This Co-Founder Was Kicked Out of Retailers for Pitching a 'Taboo' Beauty Product. Now, Her Multi-Million-Dollar Company Sells It for More Than $20 an Ounce.
Have You Ever Obsessed Over 'What If'? According to Scientists, You Don't Actually Know What Would Have Fixed Everything.
Most People Don't Know These 2 Things Are Resume Red Flags. A Career Expert Reveals How to Work Around Them.
Business News

Massive Fire At Top Egg Farm Leaves Estimated 100,000 Hens Dead. What Does This Mean For Egg Prices?

Hillandale Farms in Bozrah, Connecticut went up in flames on Saturday in an incident that is still under investigation.

Business News

These Two Cars Are Stolen So Often Insurance Won't Cover Them

Progressive and State Farm have dropped some older Hyundai and Kia models after learning that a design flaw makes them easy to start without a key.

Business Solutions

5 Procurement Trends To Keep on Your Radar for 2023

Procurement professionals must adapt to inflation and a shortage of skilled labor in the face of an economic recession. Investing in a workforce paired with retraining and development strategies will put your company on top amid economic uncertainty.

Business News

Out With the Kibble and In With the Steak. The World's Richest Dog Has a Net Worth of $400 Million – And a New Netflix Docuseries Too

'Gunther's Millions' is set to unpack the pooch's mysterious fortune and what those around him have done with his inheritance.

Business News

'This Just Can't Be for Real': Fyre Festival Fraudster Billy McFarland is Now Hiring For His New Tech Company -- And He's Already Selling Merch

McFarland was released from house arrest last September and is currently being ordered to pay $26 million in restitution to fraud victims.