New Jersey and Oklahoma have established, or required their respective state taxing authorities to establish, Voluntary Disclosure Programs that will run for a limited time. The programs will allow noncompliant taxpayers to voluntarily file and pay past-due taxes with various benefits, including limited lookback periods and waiver of penalties and/or interest. Meanwhile, Rhode Island and Texas have also enacted legislation authorizing the future establishment of tax amnesties.
The state of New Jersey launched a Limited Time Voluntary Disclosure Program running from August 21, 2017, through November 21, 2017, aimed at out-of-state sellers soliciting sales through referral agreements, including online advertising agreements. Effective July 1, 2014, the state expanded the definition of “seller” subject to New Jersey sales and use tax. The new legislation created a rebuttable presumption that retailers and service providers without a physical presence in New Jersey are subject to the state’s sales and use tax if they solicit sales through an independent contractor or other representative with physical presence in the state. The independent contractor or other representative may solicit sales directly or indirectly. A link on an internet website qualifies as a referral for purposes of determining if a seller is subject to this presumption of taxability.
Sellers who have never been contacted by the Division of Taxation regarding sales and use tax compliance are eligible for the program. Participants in the Voluntary Disclosure Program will benefit from a limited lookback period. Filings and payment will only be required for tax periods beginning January 1, 2017. The state will close all tax periods from July 1, 2014, the effective date of the expanded “seller” definition statute, through January 1, 2017, and release the taxpayer from liability for those periods. All penalties will be waived. However, statutory interest will apply.
On May 24, 2017, H.B. 2380 was enacted to require the Oklahoma Tax Commission to establish a Voluntary Disclosure Initiative (“VDI”). The Tax Commission has now issued administrative rules for the VDI, which will begin September 1, 2017, and end November 30, 2017. Participating taxpayers will be required to pay past due taxes for up to the prior three years, but not penalties or interest.
The following taxes are included in the Oklahoma VDI:
- Mixed Beverage tax levied pursuant to Section 576 of Title 37 of the Oklahoma Statutes
- Gasoline and Diesel tax levied pursuant to Section 500.4 of Title 68 of the Oklahoma Statutes
- Gross Production and Petroleum Excise tax levied pursuant to Sections 1001, 1101 and 1102 of Title 68 of the Oklahoma Statutes
- Sales tax levied pursuant to Sections 1354 of Title 68 of the Oklahoma Statutes
- Use tax levied pursuant to Section 1402 of Title 68 of the Oklahoma Statutes
- Income tax levied pursuant to Section 2355 of Title 68 of the Oklahoma Statutes for tax periods ending prior to January 1, 2016
- Withholding tax levied pursuant to 2385.2 of Title 68 of the Oklahoma Statutes
Individuals and businesses are eligible to participate in the VDI as long as they have not been contacted by the State, or a third-party acting on behalf of the State, regarding the taxes that they are seeking to pay in the VDI. Payment of the tax must be made during the VDI period or a payment plan must be approved during the VDI period to ensure penalties and interest are waived. To ensure the penalties and interest are not charged in the future, the taxpayer must stay in compliance for one year after the VDI program ends.
Rhode Island H. B. 5175, signed August 3, 2017, requires the Division of Taxation to establish a tax amnesty program for any taxable period ending on or prior to December 31, 2016. The amnesty program will run for 75 days ending on February 15, 2018. All taxpayers and all tax types are eligible for the tax amnesty program with the exception of any taxpayer under criminal or civil investigation or party to any court proceeding for state tax fraud pending in Federal or Rhode Island State Court. Participants in the Amnesty Program will benefit from a waiver of all penalties and a 25 percent reduction of the interest due.
Texas S. B. 1, effective September 1, 2017, requires the Comptroller of Public Accounts to establish a tax amnesty program for Texas sales and use taxes. While a date for the amnesty program has not been announced, the legislation specifies amnesty will only be available for a limited duration. Participants will benefit from the waiver of penalty and/or interest based on the determination of the Comptroller.
- New Jersey, Oklahoma, Texas, and Rhode Island’s Amnesty and Voluntary Disclosure Programs present an opportunity for taxpayers to come into compliance with their tax obligations, and reduce related accounting reserves, if any.
- New Jersey, Oklahoma, and Rhode Island publish lists of their largest delinquent taxpayers. These programs may provide an opportunity for taxpayers with large tax delinquencies to avoid tarnishing their reputation by not appearing on these lists.
- While the criteria and period of the Rhode Island and Texas amnesty programs have not yet been established, potentially affected taxpayers should monitor future amnesty-related developments in both states or take advantage of each state’s voluntary disclosure program.
- Taxpayers considering participating in these programs should consult with their financial statement auditor and tax advisor to evaluate and determine the potential financial statement implications with respect to income taxes under ASC 740, including the impact on current and deferred taxes, uncertain tax benefits, and disclosures, as well as with respect to sales/use and indirect taxes under ASC 450, including impact on reserves and accruals.