As of January 1, 2018, Washington’s Marketplace Fairness Act requires remote sellers, marketplace facilitators, and referrers that meet certain statutory criteria to do one of the following:
- Collect and remit sales or use tax
- Comply with certain notification and reporting requirements
The legislation specifies that failing to meet this requirement could result in significant penalties. However, businesses that voluntarily register with Washington by June 30, 2018, to comply with Washington tax laws and pay prior tax obligations may now receive certain benefits through the Washington Marketplace Fairness Penalty Reduction Program.
Who’s Affected
Remote sellers, marketplace facilitators, and referrers with a physical presence in Washington are affected by the legislation as well as the following:
- Remote sellers that, during the current or previous calendar year, had at least $10,000 of gross receipts from retail sales sourced to Washington
- Marketplace facilitators who, during the current or previous calendar year, had at least $10,000 of gross receipts from retail sales sourced to Washington, whether in their own name or as an agent of a marketplace seller
- Referrers who, during the current or previous calendar year, received at least $267,000 of gross business income from a referrer's services that were apportioned to Washington or from retail sales that were sourced to Washington
For more information on the Washington Marketplace Fairness Act, see our previous Alert.
How the Program Works
Businesses that voluntarily register for the program by June 30, 2018, may be eligible to receive the following benefits.
Penalty Reductions
The following penalties currently apply; however, they may be reduced for eligible businesses.
- 5% penalty for substantial underpayment of tax
- 5% unregistered penalty
- 29% late filing penalty
Reduced Look-Back Period
The tax periods will be limited to the prior four calendar years plus the current year, which is applicable to the extent the taxpayer has other tax obligations owing that are incremental to marketplace fairness-related tax matters.
Eligibility
Businesses that have a Washington State tax obligation and meet certain other criteria can be eligible for the program. However, the program doesn’t apply to penalties imposed for failure to comply with use tax notice and reporting requirements.
In order to qualify for the Marketplace Fairness Penalty Reduction Program a business must:
- Not engage in evasion or misrepresentation
- Never have been contacted by the Department of Revenue for audit or investigation purposes
- Never have been registered with or reported taxes to the Washington Department of Revenue
Businesses that have collected and unremitted sales tax are ineligible for the benefits of the program.
Application Process
To participate, taxpayers must:
- Submit an online application
- Disclose the business identity, if applicable—because businesses can choose to apply anonymously—however, the business must disclose its identity within 15 days of applying and no later than June 30, 2018
- Sign and return the Voluntary Disclosure Agreement within 30 days after the application is approved
- Register your business by filing a business license application
- Pay prior tax obligations
- Stay in compliance with the Washington Department of Revenue
Each entity, regardless of affiliation, must go through the application process separately.
We’re Here to Help
For more information about how the Marketplace Fairness Penalty Reduction Program may affect you or your business, contact your Moss Adams professional or email statetax@mossadams.com.