Retailers' Rights and Duties Under the Streamlined Sales Tax Project (SSTP)
Introduction
All around the country, state legislatures and businesses are faced with the question of whether to participate in the Streamlined Sales Tax Project (SSTP). SSTP is intended to simplify sales and use taxes in the age of Internet commerce and provide a structure for states to efficiently collect taxes on remote sales. Even in the small minority of states that do not have a state sales tax, SSTP is an issue because retailers in those states can voluntarily agree to participate in SSTP.
How does SSTP Work?
For states to participate in SSTP, they must first enact the Streamlined Sales and Use Tax Agreement (SSUTA). SSTP was designed to take effect when ten states had adopted the uniform legislation. That occurred in 2005, and additional states can join as they bring their laws into compliance. Currently, there is a two-tier system for SSUTA implementation, with member states having either member or associate member status. The Streamlined Sales Tax Governing Board and the National Council of State Legislatures track state by state participation closely.
Under the SSUTA, businesses may register to collect sales and use tax on sales into member states. In return for registering, these businesses receive the benefits of amnesty for uncollected taxes in member states and simplified reporting of state and local sales tax collection, with only one tax return required per state. Registration is permitted even if the business is located in a state which has not adopted SSUTA.
What are the "Sourcing" Rules for Online Taxation?
SSUTA provides detailed rules for determining whether a retail sale conducted over the Internet is taxable. The term for this is "sourcing" the sale; essentially, it involves of the process of determining the purchaser's residence. These rules include the sale of services as well as tangible goods. In most cases, the rules require online retailers to collect sales and use taxes according to where the goods were shipped.
Sourcing is important because that is what enables states to collect tax and businesses to achieve greater certainly regarding their obligations. SSTP encourages businesses to voluntarily collect sales and use taxes using highly sophisticated software that will calculate the amount of tax due in a given state. Remote sellers can choose to contract with a Certified Service Provider (CSP) that would handle state-by-state returns, or they can deal with sales and use taxes on their own, using a Certified Automated System (CAS). Whichever option is chosen, advanced software is crucial to bringing down costs of compliance for retailers.
Amnesty
Businesses that register under the SSUTA in a given state within twelve months of its adoption in that state are not required to pay uncollected sales and use taxes in that state for sales made when the seller was not registered. In other words, this functions as a grant of amnesty for any uncollected or unpaid taxes on the part of the seller. It not only precludes assessment for uncollected or unpaid taxes; it also precludes any interest or penalties. In order to receive amnesty, the seller must agree to register in all full member states of the SSUTA, including those that become members after the seller's registration.
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