This SSUTA is the result of the cooperative effort of 44 states, the District of Columbia, local governments and the business community to simplify and make more uniform the sales and use tax collection and administration for retailers and states.
The SSUTA minimizes costs and administrative burdens on retailers that collect sales tax, particularly retailers operating in multiple states. It encourages "remote sellers" selling over the Internet and by mail order to collect tax on sales to customers living in the Streamlined Member States. It levels the playing field so that local "brick-and-mortar" stores and remote sellers operate under the same rules. This Agreement ensures that all retailers can conduct their business in a fair and level competitive environment.
The Streamlined Sales and Use Tax Project was created by the National Governor’s Association (NGA) and the National Conference of State Legislatures (NCSL) in the fall of 1999 to simplify sales tax collection.
According to the U.S. Census Bureau, general sales and gross receipts taxes comprise over 33 percent of total state tax collections. The sales tax is second only to personal income taxes as the largest source of state revenue.
Leaders from the NGA and NCSL are members of the Advisory Commission on Electronic Commerce that was created when the Internet Tax Freedom Act was passed. As a result of the work of this Commission, the leaders of those two organizations were concerned that a 1930's sales tax would not be relevant in 21st century commerce. This finding resulted in the nation's governors directing their tax administrators to develop a simpler, more business-friendly sales tax system.
The purpose of the SSUTA is to provide a road map for states who want to simplify and modernize sales and use tax administration in their states in order to substantially reduce the burden of tax compliance. The SSUTA focuses on improving sales and use tax administration systems for all sellers and for all types of commerce through all of the following:
A. State level administration of sales and use tax collections.
B. Uniformity in the state and local tax bases.
C. Uniformity of major tax base definitions.
D. Central, electronic registration system for all member states.
E. Simplification of state and local tax rates.
F. Uniform sourcing rules for all taxable transactions.
G. Simplified administration of exemptions.
H. Simplified tax returns.
I. Simplification of tax remittances.
J. Protection of consumer privacy.
Sales tax administration is improved through tax law simplification, more efficient administrative procedures, and emerging technologies. Sales tax simplification results from: uniform tax definitions; uniform and simpler exemption administration; rate simplification; state-level administration of all sales taxes, uniform sourcing (where the sale is taxable); and state funding of the administrative costs.
To date, twenty-four of the forty-five states with a general sales and use tax have passed the conforming legislation. Those states have a total population representing about 33% of the country’s population.
The following states have passed legislation to conform to the Streamlined Sales and Use Tax Agreement: Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, Nevada, New Jersey, North Carolina, North Dakota, Ohio, Oklahoma, Rhode Island, South Dakota, Tennessee, Utah, Vermont, Washington, West Virginia, Wisconsin and Wyoming.
Other states have recently contacted Streamlined personnel regarding conforming their laws to the requirements of the Streamlined Sales and Use Tax Agreement, but have not yet enacted the necessary legislation.
A Full Member State is a state that has been determined by the Streamlined Sales Tax Governing Board to have changed their sales tax laws so that they meet all of the requirements set forth in the SSUTA.
The 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.
Sellers that register through the Streamlined Registration system will be registered in each Streamlined state they select and will be required to collect and remit sales tax in each of those states.
An Associate Member State is a state that the Streamlined Sales Tax Governing Board has determined to: (a) either be in compliance with the SSUTA, except that changes to their statutes and rules are not all in effect at this time; or (b) in compliance with nearly all parts of the SSUTA.
Tennessee is the only Associate Member State at this time.
Article VIII, Section 801.3 SSUTA and Article III, Section 303, H SSUTA
The United States Supreme Court ruled in South Dakota v. Wayfair on June 21, 2018, that states may require sellers to collect and remit sales or use tax on sales delivered to locations within their state regardless of physical presence if economic nexus exists with the state. We are continuing to review the decision and its implications and are working with the Streamlined Member States to make the implementation of this decision as smooth as possible.
A remote seller is generally a seller that sells products or services for delivery into a state in which that seller does not have a physical presence or other legal requirement to register other than because they exceed the state’s remote seller threshold. You will need to check with each state to determine if you are required to register in that state.
This allows businesses to file report and pay sales and use tax due for all jurisdictions to one location. The state collects the sales and use taxes and distributes the local taxes to the local jurisdictions.
With few exceptions, local governments are required to tax and exempt the same products and services as the state. This minimizes the information a business must know to conduct business in a state.
Local jurisdictions are also generally prohibited from conducting audits of these businesses.
With few exceptions, a Streamlined Member State has one state sales and use tax rate and may have a second (generally lower) state rate for food and drugs. Each local jurisdiction has one local rate. For example, a state or local government may not choose to tax telecommunications services at 5% and clothing 3%. State and local governments must provide ample notice of tax rate changes and changes to local government boundaries.
One of the most difficult tax issues for a business is keeping up with the local taxes and knowing when a sale is inside or outside a local government jurisdiction.
Each Streamlined Member State must provide a database with the tax rate for every local jurisdiction. In addition, each state must provide a database that identifies all tax rates that apply within each 9 digit and 5 digit zip code area. Some states provide the tax rates based on the specific address.
State rate and boundary databases are available for any business to use at no charge.
The states hold a business harmless for charging too much or too little tax if the business calculated and collected the incorrect tax based on the state's rate and boundary files.
Audits of sellers who use Certified Service Providers (CSP) that qualify as a CSP-compensated seller are handled by the CSP. As needed, the CSP may contact the seller if additional information is needed.
States no longer punish the seller when they sell something tax exempt to a purchaser that provided a completed exemption certificate, presuming the seller did not solicit an improper exemption and no fraud was involved.
Purchasers that claim an incorrect exemption are responsible for paying the sales or use tax, interest and penalties.
Purchasers may use the Streamlined Exemption Certificate in all Streamlined Member States. This may be in paper or electronic form.
No matter how simple the sales tax is to administer, a business must collect the tax and file a tax return. The member states compensate the Certified Service Provider for businesses without a physical presence in the state. The seller must register through the Streamlined Sales Tax Registration System to contract with a Certified Service Provider.
The Streamlined Member States all use the same standard rules for sourcing transactions to state and local jurisdictions. A business does not have to worry that two states will try to tax the same sale and will have clear rules on which state's sales and use tax to charge.
While states do not vary much in the products and services they tax or exempt, they do vary significantly in how they define these products and services. A business selling a product or service in multiple states must know not only what is or is not taxable in each state, but also how one state’s definition differs from other states.
The Agreement defines over 100 different administrative terms and products and services that states either tax or exempt. A business making sales into a Streamlined state only needs to know whether the product or service they sell is taxable or exempt. Businesses no longer have to wonder how one state’s definition differs from another state.
Most businesses use software to manage their sales tax responsibility. The states partnered with private sector suppliers of sales tax administration software to certify the accuracy of their software. The states also help pay for the software for some retailers. These certified software packages do not slow down the sales process because they are quick and easy to use. Any business that uses Streamlined - certified software is generally immune from audit liability for the sales they process through that software. In addition, the states pay the cost of this service for any business is a "CSP-compensated seller" (i.e. generally does not have physical presence) in the member state.