Keeping SST benefits – including freebies – isn’t automatic

Wouldn’t it be great if you, a seller in multiple states, could get free sales tax calculation and reporting?

Sure would – and that’s long been the draw for becoming a “volunteer seller” in Streamlined Sales Tax (SST) states.

Does everyone qualify? And even if you do, how do you make sure to maintain no-cost sales tax calculation and reporting services?

Simplifying sales tax

Streamline Sales Tax is a years’-old effort to, in various forms, make sales tax compliance less of a state-by-state hodgepodge. It sprang from an idea of states’ governors almost two decades years before the Supreme Court’s 2018 Wayfair decision ignited economic nexus nationwide.

The goal of SST is to provide states a sales tax system that includes uniform definitions of terms and state and local rate simplification, as well as uniformity of tax bases, sourcing rules and administration of exempt sales. It also seeks a single online central registration system for all “member states” that will allow sellers to register in one member state and become registered in all member states, among other goals. Roughly half the states are full member states.

One frequently touted advantage of SST is for sellers to become volunteer sellers, which allows them to receive free sales tax calculation and reporting from

“Certified Service Providers” (CSPs). SST states repay CSPs for the costs to set up and integrate the SST’s certified automated system with a seller’s systems, facilitating calculation of the tax due, preparing and filing of returns and remittance of sales tax due, among other tasks. Businesses that use SST-certified software and who qualify as an SST volunteer seller can also avoid various fees for registration, calculation and filing in member states, as well as a degree of protection from audits.

According to the SST, to qualify and receive free CSP services in a member state, sellers must register for that member state through the Streamlined Sales Tax Registration System and procedurally contract with a CSP for services. Sellers must also meet all the following criteria during the 12 months prior to registration with a state:

• no fixed place of business for more than 30 days in that state;
• less than $50,000 of property and of payroll (both defined by the SST) in that state;  
• less than 25% of its total property or total payroll (again, as defined) in that state;
• not have been collecting sales or use tax in that Streamlined State as a condition for the seller or an affiliate of the seller to qualify as a supplier of goods or services to that state.

Drawbacks

The SST says only that sellers lose CSP-compensated seller status in a member state if they no longer meet all the criteria. No fines or other punitive measures are mentioned, but neither is there any introductory indication of how and when qualification is monitored.

A CSP may charge you for services in any member states in which you are not a CSP-compensated seller. This includes for states in which the seller is not a CSP-compensated seller, in states in which the seller is not registered through the SST registration system and for services beyond those required by the CSP contract (e.g., general accounting, invoice prep, billing, A/R, and consulting, among others).

Other possible charges include those for processing non-taxable transactions if those transactions exceed 30% of all transactions processed annually for a CSP-compensated seller in a particular member state.

Observers have also said that registering with a state through the SST sometimes hampers accessing your sales tax account in that state as well as problems with filing frequencies and exemption documentation.

As always with sales tax, there can be more to benefits and drawbacks than meets the eye.

If you think your business may be impacted by sales tax complexities and decisions, contact TaxConnex. TaxConnex provides services to become your outsourced sales tax department. Get in touch to learn more.