If you haven’t yet heard about Streamlined Sales Tax (SST), but you’re concerned about your sales tax collection obligations as you expand into new states, this information should be helpful. It’s not new — the Streamlined Sales and Use Tax Agreement has been around since 1999 and has 24 participating states — but with the 2018 Supreme Court case (South Dakota v. Wayfair, Inc.), it’s more relevant to businesses than ever before. In a nutshell, any company that qualifies as a volunteer seller in SST states can qualify to receive sales tax calculation and reporting services from a Certified Service Provider for free.
Initially, SST began because states were losing sales tax revenue to online or remote sales. Recognizing that complexity is often the biggest hurdle for companies selling across the United States, the idea was that if states made it easier for out-of-state sellers to comply, more companies would.
So state and local governments collaborated with the business community to minimize the complexities of sales and use tax compliance. The Streamlined Sales and Use Tax Agreement was the fruits of their labor.
At the time of this writing, the SST full member states are: 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. There were originally 44 states involved, and some of them are still working toward full membership.
What’s changed since?
Last June, the Supreme Court overruled Quill Corp. v. North Dakota’s physical presence rule with its decision in South Dakota v. Wayfair, Inc. Now, in addition to physical presence establishing nexus and a sales tax collection obligation, the Wayfair ruling means states can also require sellers without a physical presence in a state to collect and remit sales tax based on their economic activity in the state, also known as economic nexus.
After the ruling, more than 40 states have adopted economic nexus, requiring certain out-of-state sellers to collect sales tax for transactions in the state.
Companies that previously didn’t need to worry about collecting in other states have new obligations that are creating incremental complexity, and in some cases, loads of manual work for their accounting teams. Registering for SST can help minimize the burden by simplifying the process.
Businesses that qualify as volunteer sellers can also avoid paying for registration fees, calculation of sales tax on transactions, and filing in SST member states when they use a Certified Service Provider (CSP) like Avalara. Qualifying businesses can also receive audit protection in participating states.
Qualifying as a volunteer seller
In order to qualify as a volunteer seller and obtain tax compliance automation services at no cost, a business must meet all the criteria below during the 12-month period following 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
The great news is: even if you’ve exceeded the thresholds in states that have enacted economic nexus laws, that doesn’t automatically disqualify you from receiving the volunteer status.
Automating tax compliance
Putting automation in place can help streamline tax compliance processes while saving time and money. If you qualify as a volunteer, free automation is a no-brainer, but it still makes a lot of sense for non-volunteers too.
Providers certified by SST have to meet rigorous standards for data processing and management of sales tax information. Companies like our partner Avalara can help you with all aspects of transaction tax compliance, from determining where you have sales tax nexus and an obligation to collect sales tax, to audit response.
Contact us to learn more about automation, SST, and getting your business registered in SST states or other states where you may have nexus.