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SST Streamlined Exemption Certificate. It Just Makes Sense...

author photo of Silvia Aguirre

I know some people have opinions on the Streamlined sales tax (SST) movement, but setting all political issues aside, let’s take a look at the SST sales tax exemption certificate.  In many cases when providing a sales tax exemption certificate for any state you have three choices:

  1. State Specific form
  2. Multi-state Tax Commission form  (MTC)
  3. SST form

It is normally best to get the state specific form, but many states ask for all sorts of unnecessary information on the form making it much more difficult to comprehend than it needs to be.  Poorly developed state forms include Wisconsin with 2 pages of form and 2 pages of instructions on how to complete the form, New York exemption form with many, many boxes to review and possibly check off, Idaho ST-101 with all sorts of sections to complete and Connecticut with hundreds of separate forms available to use.  The problem with many state forms is that someone from the local government developed the form to deal with their specific state requirements.  It does not work well with companies that are trying to do business in many states and understand and comply with all the laws.

The MTC form is the easiest form to complete as a buyer.  You just fill in the limited information at the top and then fill in your state ID numbers in the correct column.  From a seller's point of view these forms are dangerous.  With so many notes attached to this document, you must constantly check back and forth to make sure you are accepting the form for the correct reasons.  In many cases they can only be accepted for resale and not manufacturing exemptions.  Also, Florida keeps appearing and disappearing off the listing of states on the form.  Currently, Florida has stated it will only accept the MTC form if accompanied with a copy of the buyers FL resale license.  Well why not just send the FL resale license by itself?  It is valid as a stand alone item.  Why even bother with completing the MTC form for Florida?

Not all state auditors are evil.  I know a few and can say they are good people.  In many cases the auditor may overlook all these exceptions and qualifications to the MTC form and accept it as a valid document for the audit.  But do you really want to place bets on the generosity of your next auditor?

The SST form was developed by a committee of both various state and businesses.  Each one wanted certain items to be on the form, but simplicity was the key.  Once the format was revealed, several states adopted this as the new state exemption certificate for them, even before they joined the SST club.  It is a nice clean form.  It can be utilized as one page form for one specific state or a two page form for multiple states.  The form is very easy to comprehend and does not include unique, state specific areas to complete.  The required elements are easy to understand and complete:

  1. Name of Seller
  2. Name of Buyer
  3. Nature of buyers business
  4. Reason for exemption/ID number
  5. Signature and date

It just makes sense.  You are showing the two involved parties and the one claiming exemption is citing the reason why it should be exempt.  Many state specific forms have included the question of “what is being purchased?” which SST has removed.  The removal of this has eliminated an annoying audit process of matching the invoice data of equipment purchased to what is listed on the exemption certificate.  Even the MTC form still feels this is a necessary field.  It should not be the sellers concern.  If the buyer later discovers they should have paid tax, then it is up to them to file for use tax.

SST may someday blossom into a federal standard or it may go bust as more states each year “adjust” their laws out of compliance with SST requirements.  If nothing else, we should all be really proud that something as nice as the SST sales tax exemption certificate form came from this group and made our lives as tax managers that much easier.

Note: Silvia Aguirre is no longer accepting new comments nor questions. More recent "Exemption Certificate Mgmt" posts by Michael Fleming (of Peisner Johnson) are still active. Also use the Site's SEARCH bar to locate other helpful information.

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Comments

Note: Silvia Aguirre is no longer accepting new comments or questions.  More recent "Exemption Certificate Mgmt" posts by Michael Fleming (of Peisner Johnson) are still active.  Also use the Site's SEARCH bar to locate other helpful information.

2 Responses to SST Streamlined Exemption Certificate. It Just Makes Sense...

  • Posted by Dawn on July 31, 2013 1:50am:

    If we (the seller) receive an SST Exemption form from a purchaser for a single purchase and the reason for the exemption in section 5 is “RESALE” can the purchaser provide us with a resale number for a different state? Or does the resale #/reseller permit# need to be from the same state in which they are claiming the exemption?
    Examples: Their Resale # is from New York but they are claiming exemption in Ohio? Their Resale # is from Oklahoma but they are claiming exemption in Washington State?

    • Posted by Author photo of Silvia AguirreSilvia Aguirre on July 31, 2013 5:23am:

      Interesting... best bet is to get the actual state tax id number for each state. The SST form has a second page with a list of states that are acceptable. So if the NY customer has nexus in OH, OK and WA, they should put the appropriate state issued number. If however, they are not registered in neither of the states OH, OK and WA, then they must indicate in each of the lines they have "no nexus" and hence placing their NY number in the space. In my opinion, this is the best way of protecting and understanding the transaction. Hope this helps.

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