Establishes a retail merchants voluntary compliance program relating to past due sales tax liability

BILL NUMBER:S4942

Title of bill

An act to amend the tax law, in relation to establishing a retail merchants voluntary compliance program for purposes of sales tax liability

Purpose

This bill will direct the Commissioner of Taxation and Finance to develop a retail merchants voluntary compliance program for eligible taxpayers.

Summary of provisions

A new Section 1700-a is added to the Tax Law to provide that a taxpayer who has not been subject to an outstanding sales tax assessment from the New York State Department of Taxation and Finance in the previous five years shall be deemed eligible to enter into a compliance agreement with the Commissioner to encourage timely and accurate future payments. The Commissioner is granted authority to develop the terms of the compliance agreement which may include the requirement of a segregated bank account for sales tax collections, more frequent tax deposit requirements or the use of a segregated point of sale system.

Taxpayers who enter into the voluntary compliance agreement shall be granted a waiver from applicable interest and penalties for their assessment and shall be protected from criminal actions relating to the failure to pay the appropriate amount of sales tax.

The Commissioner, if satisfied that the taxpayer is unable to make full payment of the disclosed tax liability, may enter into an installment payment program subject to terms and conditions imposed by the Commissioner. The compliance agreement shall provide that the taxpayer is exempt from criminal liability and shall be exempt from any criminal tax prosecution if they comply with the terms of the installment payment agreement.

Any taxpayer who intentionally provides misleading or false information in submitting information to the Commissioner or attempts to evade tax due under the agreement shall be subject to rescission of the agreement. The Commissioner is granted authority to promulgate rules, regulations, and take any and all actions necessary to implement the voluntary compliance program.

Justification

New York state sales tax laws are complex placing retail merchants in jeopardy of assessments from the Department of Tax and Finance for unpaid sales tax. In addition to any taxes due, the merchants are also liable for interest and penalties. While collecting unpaid taxes is important, little if anything is done by the Department to incentivize future tax compliance. This bill establishes a program under which retail merchants that have been determined to owe sales tax and have not had a sales tax assessment within the previous five years will be eligible for a waiver of any interest or penalties due

if they agree to undertake certain actions designed to ensure future sales tax compliance. Under new provisions of the Tax Law enacted as part of the 2011-12 budget the Tax Department is authorized to impose such conditions on recalcitrant retail merchants. While that may be appropriate under certain circumstances, the provisions of this bill will provide an incentive for retail merchants to use an assessment from the Department as an opportunity to fine tune their sales tax collection and remittance process and gain future compliance with the law. These business owners deserve the support and assistance of the Department rather than being treated as criminals. They are the backbone of the state's economy and the public interest is well served by the government giving them a helping hand transitioning to a more compliant business operation.

Legislative history

New Bill.

Fiscal implications

Undetermined at this time. Likely to result in additional state revenue due to taxpayers becoming compliant.

Effective date

This act shall take effect immediately.