Washington offers Marketplace Fairness Penalty Reduction Program through June 30, 2018

Certain out-of-state marketplace facilitators, remote sellers, and referrers have an obligation to either collect and remit sales tax or comply with use tax notice and reporting requirements under Washington’s Marketplace Fairness law, which took effect January 1, 2018. To encourage compliance, the state is offering a Marketplace Fairness Penalty Reduction Program through June 30, 2018.

Non-compliant out-of-state sellers, referrers, and marketplace facilitators are invited to voluntarily register with the state and pay any prior tax obligations. In exchange, the state will reduce penalties and limit the look-back period (the length of time a business can be held liable) for successful applicants.

Benefits of the Penalty Reduction Program include:

• Reducing the look-back period from seven years plus the current year to four years plus the current year
• Waiving up to 39 percent of potential penalties, including
  • 5 percent assessment penalty for substantially underpaid tax
  • 5 percent unregistered penalty
  • 29 percent late payment of a return penalty

However, the state will not waive the $20,000 annual platform notice penalty or the penalty for failure to report and notify, or any portion of the interest due (more on penalties for non-compliant vendors).

Prior contact with the Department of Revenue is allowed

State voluntary disclosure programs typically disqualify any business that’s had prior contact with the state tax authority over the taxes in question. The Marketplace Fairness Penalty Reduction Program is unusual in that it does not automatically disqualify such businesses.

Any business wishing to apply for the Penalty Reduction Program that’s had prior contact with the Washington Department of Revenue (DOR) is advised to “contact the Department employee who you communicated with previously for more information by June 30, 2018.”

The Penalty Reduction Program is also open to any unregistered affiliates, subsidiaries, and related entities a non-compliant business has, even “if the Department has contacted you for enforcement purposes … and has asked for information regarding any affiliates and related entities.”

Applying anonymously is permitted

Although the DOR will ask all applicants to disclose the identity of their business and provide contact information to verify eligibility for the program, a non-compliant business may initially come forward anonymously.

Applicants who come forward anonymously will have 15 days from the date of application to disclose the identity of the business. If the identity isn’t disclosed by the 15^th day, the application won’t be approved.

Learn more about the Washington state Marketplace Fairness Penalty Reduction Program at the DOR. Learn more about voluntary disclosure agreements in general here.