The Streamlined Sales Tax is an organization that started in 2000 with the goal of finding solutions for the complexity in state sales tax systems. Today there are 24-member states. In light of the U.S. Supreme Court’s decision effectively allowing states to require out-of-state merchants to collect sales tax on transactions within their borders, the activities of the Streamlined Sales Tax are vital to your business.
How the Streamlined Sales Tax works
Because there are more than 10,000 sales tax jurisdictions in the U.S. when you factor in local sales taxes, and the items (and even definitions of items) subject to sales tax differ within these jurisdictions, the Streamlined Sales Tax was formed to create uniformity. Its goals include standardizing tax base definitions and simplifying tax returns and other obligations for remote sellers.
Businesses can try to handle sales tax obligations on remote sales when they are required to collect them. Or they can use a certified service provider (CSP), which is a company approved by the Streamlined Sales Tax:
The CSP works with your accounting system and other enterprise resource platforms (point of sale, e-commerce) to ensure the business’s compliance with sales tax obligations.
States starting to exercise their taxing authority
The case decided by the U.S. Supreme Court concerned South Dakota’s sales tax law, which applies to remote sellers with $100,000 or more in annual sales or 200 in-state transactions. So small sellers, such as many on eBay and Etsy, are exempt from sales tax responsibilities.
Now Washington state announced that it will begin to collect sales tax from out-of-state merchants on transactions beginning October 1, 2018. Remote sellers making either $100,000 or more in sales to Washington purchasers or 200 transactions with Washington purchasers must register their business and collect/submit retail sales/use tax on those sales. (Since January 1, 2018, Washington’s Marketplace Fairness law had already required merchants selling more than $10,000 in the state to either collect sales tax or follow use tax notification and reporting requirements.) Washington said that businesses can register with the Streamlined Sales Tax to meet its new sales tax requirement (this state is a member).
Delaware, Montana, Oregon, and New Hampshire have no sales tax. There’s no state sales tax in Alaska but some localities in that state can charge one. So if you sell into these locations, you don’t have don’t have to worry about sales tax collections there. But merchants everywhere, even those located in no-sales-tax locations, must conform to state and local sales tax laws if they transact business remotely where sales tax rules apply. Look for more states like South Dakota and Washington to articulate sales tax rules for remote sellers, and watch for the exemption amounts for small businesses.