Streamlined Sales Tax, Nexus and Online Retailers
The Streamlined Sales Tax Project (“SST” or “Project”) was primarily intended to simplify the collection and remittance requirements imposed on U.S. businesses of all sizes. The SST Governing Board adopted the Streamlined Sales and Use Tax Agreement (“SSUTA”) in November of 2002 and began registering business that chose to collect and remit sales and use tax in member states regardless of whether or not they were required to do so. At the time, many of these registrants were seeking amnesty for unpaid tax in an effort to move forward with a clean slate.
Has the reason for registering with SST changed over the years? Yes, the reasons have and will continue to change as the result of states beginning to extend nexus to remote sellers via their “affiliates” or other related companies operating within the state. But was this the intention of SST all along?
As large states, such as New York, Texas and California, begin to reinterpret their definition of nexus and extend it to remote sellers, the value of SST becomes increasingly important, even for those states that are not members of the Project. Since the SST Governing Board adopted the SSUTA, they have consistently promoted federal legislation that would overturn the 1992 Quill decision that currently prevents states from asserting nexus over remote sellers. By holding fast to a clause in Quill that would allow Congress to overturn the decision provided that the burden on sellers to collect and remit is sufficiently minimized, SST has laid the framework for its member states, and possibly non-member states, to begin imposing nexus on remote sellers that wish to conduct business in the state. With several reliable and affordable software solutions available to taxpayers of all sizes and needs, as well as the shift of that burden from taxpayer to the taxpayer’s Certified Service Provider for accurate tax calculation, it would appear that SST has successfully put in place a model that can be adopted by all states allowing them to very easily assert nexus over remote sellers.
The current bill before Congress (HR 5660: full text available at http://www.opencongress.org/bill/111-h5660/show) would enact federal legislation that would allow SSUTA member states to begin requiring all remote sellers that do not meet the small business exception to collect and remit sales tax in their state. This small business exception is sparking debate with California lawmakers and has garnered significant negative feedback in several other states where no such exception exists. Would a re-drafted version of the ruling, which includes a small business exception, be more readily accepted? Reactions and general opinion among the business community indicate that states want a new ruling. The SSUTA was written with the intention of minimizing tax burden on small businesses, but the California law does not always agree.
So, where do we go from here? It is doubtful that California will become a member to the SSUTA any time soon. The same is true for other larger states like New York and Texas. However, federal legislation that overturns the Quill decision may give these states the fuel that they need to get all-encompassing laws passed. States may still have to contend with large remote sellers cutting ties with their state, as Amazon has done in New York, Illinois, South Carolina and Texas, but they should be in a much better position to begin requiring collection.
BTW - In addition to our SST blog posts (below) - don't forget to check these other Streamlined Sales Tax (SST) resource pages on SalesTaxSupport.com:
Other recent “Streamlined Sales Tax (SST)” posts by Cory Barwick:
- Ohio SST Membership Nod: A Very Tasty Carrot Indeed!
- Streamlined Sales Tax: Will Ohio Go For $20 Million Carrot?
- Dear Streamlined Sales Tax… Where Have You Been?
- Oregon Sales Tax? Say it ain't so!
- Hey Maine! Ready to Simplify Sales Tax?