Understanding the Streamlined Sales and Use Tax Agreement (SST)

Robin Hall
Posted by Robin Hall on Aug 12, 2021 12:27:28 PM

The Streamlined Sales and Use Tax Agreement arose out of the Streamlined Sales Tax Project, which was first organized in March 2000 as a way to simplify sales tax collection and remittance for remote sellers. The agreement is administered by the Streamlined Sales Tax Governing Board, Inc. This agreement allows remote businesses to more easily compute and remit sales tax to the states where they have established nexus.

The SST also levels the playing field for all sellers, whether they are remote sellers outside the state or local brick-and-mortar sellers located within that state. It does so by enabling all sellers in a given state to pay sales tax, and thus not create an unfair advantage for those who would not pay sales tax. The guiding principle of the agreement is to make it easier for remote businesses to fairly compete with local businesses in a given state with a focus on four areas.

State level administration allows for a single point of collection for sales tax. Uniform tax base requires states to make all jurisdictions use the same tax base; the same goods and services are taxed or exempted across the state. Each individual state creates its own tax base choices and rates. Simplified tax rates require the same rate to be levied across all jurisdictions within the state. Finally, uniform sales sourcing rules are applied for in-state ‘origin’ and for out-of-state ‘destination’ sourcing.

Recall that once a business has reached the threshold dollar amount or number of sales, said business must register to pay sales tax. Once registered, they must begin to remit those collected sales tax dollars to the comptroller of said state. Also keep in mind that if you have established a physical presence in a given state, such as by having a physical location such as a storefront or a warehouse, or a remote employee in that state, you are no longer considered a remote seller and must register in that state no matter what amount of sales you have there.

So how does the agreement make paying sales tax fairer, easier and less burdensome for remote sellers? It does so by implementing a series of steps that reduce the time and expense put out by remote businesses once they have registered and begun to pay out-of-state sales tax.

  • State level administration reduces business expenses – States that are members of the agreement allow businesses to report and pay sales and use taxes for all jurisdictions within that state to a single administrator. This greatly reduces the burden placed on sellers for tracking a multitude of locations and rates where they would have to remit sales and use taxes. The state then disburses these funds to localities and keeps the remaining sales tax that is due to the state.
  • Rate simplification reduces business expenses – There are very few exceptions to this rule on rate simplification. The state will have a single sales and use tax rate and might have a second rate for food and drugs. Each locality has a single local rate. State and local governments must provide ample notice of rate changes and local boundaries.
  • Rate and boundary files reduce business expenses – As noted, keeping up with taxes levied by localities within a state can be incredibly burdensome. Each member state must provide a database with a tax rate for all localities. They must also provide a database that shows rates that apply to all 9 and 5 digit zip code areas. These databases are available to any business free of charge.
  • Uniform sourcing rules reduce business expenses – Member states all use the same rules for sourcing a transaction to a state or locality. Businesses will not need to concern themselves with the possibility that more than one state will attempt to tax a sale, and businesses have clear rules on which states sales and use tax to charge.
  • An additional advantage to states being members of the agreement and businesses adhering to the agreement is that said businesses can make use of certified service providers. These are private companies that have been certified to work with businesses to facilitate the payment of sales and use taxes to the states where they are owed. Rather than try to compute the myriad taxes that should be remitted to a state and each of it localities, one of these certified service providers can be employed to compute and verify taxes to be remitted. This can be a big deal to a business owner for several reasons. For one, member states compensate the certified service providers for businesses without a physical presence in that state. Note that the business must be registered with the SST and contract with one of the certified service providers to receive this benefit. Another huge advantage to using one of the certified service providers is that when a business uses the provider’s software to compute and remit sales and use taxes the providers themselves certify the accuracy of the software. This means that when using this certified software, the business will generally be immune from audit liability for any sales that are processed through that software. Additionally, should an audit take place, and one of these certified software solutions was employed for the calculation of taxes to be remitted, the certified service provider conducts the audit.

Being a Volunteer Seller (versus being a Non-Volunteer Seller) is pretty simple, with just a few requirements. These are that you have no fixed place of business for more than 30 days, have less than $50,000 of property in the state, have less than $50,000 of payroll in the state, and less than 25% of your total property or payroll is in that state. There are several benefits associated with being a Volunteer Seller, as noted below.

Benefit

Volunteer

Non-Volunteer

Free SST registration in 24 states

Yes

Yes

Single identification number to file and pay taxes in registered states

Yes

Yes

Uniform filing forms and exemption certificates

Yes

Yes

Access to boundary and rules data

Yes

Yes

Centralized source of updates and information regarding sales tax rules and regulations

Yes

Yes

Free certificate sales tax calculation software

Yes

No

Free preparation and filing of sales and use tax returns

Yes

No

Free audit support

Yes

No

 

If you are using a sales tax software to help with the computation of the sales tax on your sales, your Certified Service Provider (CSP) can register your business for you. Each sales tax software company is a bit different, so check with the company that you use.

Topics: Sales Tax


 

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