If you run an e-commerce business and have very minimal physical presence in the states you are selling to, it's very likely that you can get your sales tax compliance done for free, at least in 24 states, through the Streamlined Sales Tax (SST) program!
What is the Streamlined Sales Tax (SST) program?
The Streamlined Sales Tax program (SST) started more than 20 years ago, long before the Wayfair decision. It was established in March of 2000 after the US. Supreme Court ruling that a state may not require a seller to register and remit sales tax unless they have a physical presence in that state. That ruling was overturned by the South Dakota vs. Wayfair decision in 2018.
The SST's mission is to modernize, simplify and unify all the things that makes sales tax difficult for businesses selling into multiple states with minimal physical presence. So, now what? A CSP-compensated seller can contract with a Certified Service Provider (CSP) to register and file through the Streamlined Sales Tax program in 24 member states. The CSPs are compensated by states through a percentage of sales tax they remit on behalf of the CSP-compensated sellers. That means the businesses don't pay CSPs anything for sales tax registration, calculation, and remittance.
What is a CSP-compensated seller?
Getting your CSP's services paid for by the state is a separate question from whether you actually owe sales tax somewhere. That's still determined by normal nexus rules. SST calls a business that qualifies for free CSP services a CSP-compensated seller (formerly "volunteer seller"), and this test is more forgiving than you might expect. You don't need zero physical presence in a state to qualify. You can have some presence there and still get free CSP service, as long as it stays under SST's specific thresholds.
Some physical presence in this sense is defined as:
- No fixed place of business in that state for more than 30 days
- Less than $50,000 of property in that state
- Less than $50,000 of payroll in that state
- Less than 25% of its total property or total payroll in that state
- Was not 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.
Therefore, if you are a remote seller with absolutely no physical presence in any other states other than your home state, you are a "CSP-compensated seller" and can utilize the SST program. If you're not sure how this compares to general sales tax nexus rules, that's worth a read too, as SST's "CSP-compensated seller" test is more lenient than a typical nexus determination.
Who are the certified service providers?
- Avalara
- TaxCloud
- Sovos
- Accurate Tax
- Taxify (a sub product of Sovos) *
- Exactor (a subsidiary of Intuit) *
*certified by SST but are not currently offering free services
What are the member states?
When SST started, 24 member states got together and established:
- A central registration and filing portal
- A unified definition of products
- Simplified exemption certificate
- A Simplified administrative process for tax rates and boundaries
Please see below for a picture of the current member states.
If you are selling remotely into any of these 24 states, you can use the SST program and do one registration for all 24 states (or whichever states you choose to comply in). This “pick and choose” option was effective a couple years ago. Previously, if you registered through SST, you had to register with all 24 states.
You'll also have only one form to file in all 24 states. You will have the same definition of what a certain product is in all 24 states. And, these 24 states will need to follow the same administrative process when it comes to exemption certificates, etc. It's almost like, for sales tax purposes, these 24 states are like 1 state.
For example, say you are a remote seller based in California. You are selling to all the states and want to collect in all the states. You can register for 24 states on SST and then register for the rest on their own websites. Now you'll have to do 22 registrations for the 45 states that have sales tax, instead of 45 registrations.
What services can CSP-compensated sellers get for free?
If you are a CSP-compensated seller and you want to participate in the SST program, reach out to one of the certified service providers. They can provide these services for FREE:
- Set up and integrate its certified system with your system to calculate tax due at the point of sale or online checkout.
- Prepare & file returns and remit taxes collected to all the member states
- Registrations in all the member states
- Audit defense
Here’s a more comprehensive list.
What about the states that are NOT part of the SST program?
Unfortunately, you won't get free services for sales tax compliance (calculation, registration and filing) in non-member states. If you have nexus in a non-member state, you will need to go to that state's website, create an account, register and then file through that website's online portal either manually or via a software.
What are the pros and cons of the Streamlined Sales Tax program?
The biggest advantage of the SST program definitely is that it's free for businesses to become sales tax compliant in 24 states.
However, there are some drawbacks of the program, as well. First, it doesn't cover all the states, especially the big states like California, New York and Texas. Businesses still have to register and file in these other states, having to pay accountants or a software company. Second, the SST filing doesn't include taxes other than sales tax and doesn't cover home ruled cities. For example, Washington's B&O tax is not covered by the SST filing, nor does Denver's return (if you have physical presence in Denver and has an obligation to register and file in Denver).
Third, the requirements are strict when it comes to exemptions and tax calculated by the CSPs. Every exemption taken (other than product being nontaxable) needs to have an exemption certificate validating the transaction being exempt. Otherwise, the CSP will calculate tax and the business will need to pay out of pocket. CSPs are required to remit taxes that they calculate, even if it's not what businesses collect sometimes. This happens when the CSP's tax rate database doesn't match the sales tax engine used at point of checkout.
For a video version of everything you need to know about the Streamlined Sales Tax program, check our YouTube video.
Frequently asked questions
Is the Streamlined Sales Tax program really free?
Yes, for qualifying businesses. Certified Service Providers are compensated by the member states through a percentage of the sales tax they remit, so qualified sellers don't pay CSPs anything for registration, calculation, or remittance.
Do I have to register in all 24 SST states?
No, not anymore. You can now choose which of the 24 member states to register in, rather than being required to register in all of them, unlike the program's earlier requirements.
What states are NOT covered by SST?
California, New York, and Texas are the most notable non-member states. If you have nexus there, you'll need to register and file directly with each of those states.
Does SST cover local taxes like home-rule cities or Washington's B&O tax?
No. SST filing only covers sales tax in member states. It doesn't include other taxes like Washington's B&O tax, and it doesn't cover home-rule jurisdictions like Denver, even within an SST member state.
What happens if I don't have a valid exemption certificate for a tax-exempt sale?
The Certified Service Provider will calculate and remit tax on that sale regardless, and you'll be responsible for covering that cost out of pocket, even if the sale should have been exempt.
Who are the Certified Service Providers under SST?
Avalara, TaxCloud, Sovos, and Accurate Tax currently offer free services. Taxify and Exactor are certified but don't currently offer free services under the program.
Get the right sales tax strategy for your business
Between the eligibility rules, the states SST doesn't cover, and the strict exemption requirements, it's worth confirming SST is actually the right fit for your business, and worth having someone in your corner either way.
Not sure where you stand? Take our free Sales Tax Risk Assessment, 20 quick questions, about five minutes, for a personalized read on your exposure across every state, not just the SST ones.
Our sales tax team can also help you figure out whether SST makes sense for you, get you set up with the right Certified Service Provider, and handle everything SST doesn't cover, the non-member states, home-rule cities, and taxes like Washington's B&O.
