Editor’s Note: This guest blog post comes courtesy of Jeff Stanton with Avalara.
Although the Streamlined Sales and Use Tax Agreement was established in 2000 and now has 24 member states, many businesses still don’t understand what it is or how it could improve their sales tax compliance efficiency. It’s worth exploring: If you qualify as a volunteer seller in Streamlined Sales Tax (SST) member states, you can use an SST Certified Service Provider — like Avalara — to register, calculate sales tax, and file returns at no cost.
Tell me more – what is SST?
SST is the result of a joint effort by 44 states, Washington, D.C., and local business communities to simplify the collection and reporting of sales tax.
That there was a need for simplification was underscored by the Supreme Court of the United States, which had ruled twice — in National Bellas Hess v. Illinois (1967) and Quill Corp. v. North Dakota (1992) — that state and local sales tax compliance was too complicated to inflict on out-of-state businesses with no physical connection to a state. In response, the Sales and Use Tax Governing Board worked to remove many of the burdens affiliated with multi-state sales tax compliance.
The resulting Streamlined Sales and Use Tax Agreement makes sales tax administration in SST states less costly and burdensome for remote sellers. SST member states are required to have:
- A central, electronic registration system
- Consumer privacy protection
- Simplified administration of exemptions
- Simplified state and local tax rates
- Simplified tax remittances and returns
- State administration of sales and use tax collections (no self-collecting local jurisdictions)
- Uniform state and local tax bases
- Uniform sourcing rules for all taxable transactions
- Uniform tax base definitions and rules
There are currently 23 full member states: Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, Nevada, New Jersey, North Carolina, North Dakota, Ohio, Oklahoma, Rhode Island, South Dakota, Utah, Vermont, Washington, West Virginia, Wisconsin, and Wyoming. Tennessee is an associate member state.
Why is SST resurfacing now?
One year ago, the Supreme Court overruled the physical presence rule it had previously upheld in National Bellas Hess and Quill. The resulting change to the sales tax landscape has thrown many companies for a loop.
Before the court’s decision in South Dakota v. Wayfair, Inc. (June 21, 2018), having a physical presence in a state was the only way to trigger a sales tax collection obligation. Wayfair authorized states to also base a sales tax collection obligation solely on a remote seller’s economic activity in that state, or economic nexus.
It also gave a shout out to the SST: South Dakota’s membership in SST was listed as one of three reasons the state’s sales tax system isn’t an undue burden on remote sellers (the small-seller exception and prospective enforcement of economic nexus were also noted).
As of June 2019, Washington D.C. and 42 states* — including all but one of the SST member states — have adopted some sort of economic nexus law; each requires out-of-state sellers who exceed defined sales and/or transaction thresholds to register and then collect and remit sales tax. See the growing list of states that impose a sales tax collection obligation on remote sellers.
Remote sellers who do business across numerous states need to re-assess not only where they have nexus, but also how they manage their tax compliance. Registering through the SST can make multi-state sales tax compliance more manageable.
Registering and filing through SST
Any business may register through the SST website to receive the standard benefits listed above — simplified registration and more uniform rules and regulations — in any or all SST states. And any businesses can contract with an SST Certified Service Provider (CSP) to facilitate sales and use tax compliance in SST states.
For businesses that qualify as a volunteer seller in one or more SST state(s) and contract with a CSP, there are additional perks:
- No SST registration fees
- No calculation fees
- No monthly filing fees
- Audit protection
To qualify as a volunteer seller in an SST state, your business must meet all the following criteria during the 12-month period immediately preceding the date of registration with the member state:
- No fixed place of business for more than 30 days in the state
- Less than $50,000 of property in the member state
- Less than $50,000 of payroll in the state
- Less than 25 percent of total property or payroll in the state
- Additional criteria
Outsource sales tax management to a CSP
As a CSP — one of the first certified by SST — Avalara must meet rigorous standards for data processing and management of sales tax information. We can help you with all aspects of sales tax compliance, from determining where you have sales tax nexus and thus an obligation to collect sales tax, to audit response.
*This number includes Massachusetts and Ohio, which have economic nexus for internet vendors (aka, cookie nexus).