On the heels of the Multistate Tax Commission’s amnesty program for online marketplace sellers in 23 states and the District of Columbia, the state of New Jersey is now offering out-of-state businesses a sales tax amnesty program. For an out-of-state business to qualify, it must have agreements with New Jersey-based individuals, businesses or other entities that refer New Jersey customers who generate more than $10,000 in cumulative sales during the preceding four quarterly periods ending on the last day of March, June, September and December.
New Jersey’s click-through nexus law is fairly recent. As of July 1, 2014, the state modified its definition of “seller” to include those who sell otherwise taxable goods and services into the state through arrangements with parties with a physical presence in the state. If the total sales into New Jersey traced to such third parties exceeds $10,000 annually (on a rolling quarterly basis), there’s a rebuttable presumption that the out-of-state seller has nexus by virtue of its relationship with the in-state “independent contractor.”
There are some fine points to the law, e.g., the out-of-state seller can provide proof that the in-state representative didn’t engage in any solicitation on its behalf in New Jersey. That said, the law essentially requires registration, collection and remission of New Jersey sales tax for those who generate more than $10,000 in annual sales in New Jersey through click-through or other referral basis (“referral nexus”).
Whether the referral nexus law in New Jersey—and similar laws in at least 21 states—violates the U.S. Constitution is an open question. BKD has addressed this and similar questions regarding various state efforts to expand their taxing authority in a number of webinars. However, until the U.S. Supreme Court revisits Quill Corp v. North Dakota, or Congress passes some version of an online sales tax, taxpayers are rolling the dice if they don’t comply with state law when they meet a state’s statutory nexus standards.
New Jersey Amnesty Offer
The New Jersey amnesty offer is fairly generous for this type of program. It started August 21, 2017, and runs through November 21, 2017. The terms include:
- Quarterly returns for the period between January 1, 2017, and June 30, 2017, must be filed
- The state will waive all penalties, but will assess interest (prime rate plus 3 percent)
- Taxpayers will register for future collection within 45 days of signing an agreement
- Taxpayers will file and pay quarterly returns electronically in the future
- Taxpayers will pay any interest owed within 30 days of filing the returns
In exchange for meeting the above terms, all liability—including taxes, penalties and interest—before 2017 will be waived.
To learn more about this amnesty program, contact your BKD trusted advisor.