Streamlining sales tax is an appealing concept for any small-medium business - especially if that business is active on a multi-state basis.
Considering the Streamline option? It really comes down to three key factors.
Obviously there are many issues that a company needs to weigh when considering the suitability of the Streamlined Sales Tax option. However it really boils down to three key factors; (1) the total number of states in which you have nexus, (2) the states in which you have nexus and (3) the products or services that you provide.
- Do you have nexus in only a handful of states? If so, SST may not be the best fit for you, since SST requires that participating members register and report in the SST full member states.
- Do you have sales tax compliance obligations nationwide? If so, you may benefit from SST. For example, a national retailer with nexus in 40 of the 46 states would include most of the SST member states.
- Do you have sales tax compliance obligations somewhere in between a handful of states and nationwide? If so, you may benefit from SST if you have nexus in several of the SST member states. For example, if you have nexus in 23 states but only three of those states participate in SST, SST may not be the best choice. If, on the other hand, 20 of those states are SST member states, SST may be the way to go.
Product & Service Considerations:
- Do you sell products that are taxed consistently by all states, such as children's toys, televisions, furniture, jewelry, or household cleaning supplies? If so, you can still benefit from the SST uniform electronic filing and sourcing rules for all member states.
- Do you sell products or services that are taxed inconsistently by some states such as custom software, downloadable digital products, clothing, food, medical equipment, pharmaceuticals, shipping/delivery services, voicemail services or installation services? If so, SST may be beneficial because of its uniform definitions for these products in addition to electronic filing and consistent sourcing rules.
- If you sell alcohol and tobacco products, SST may be of marginal benefit as these products are taxed at different rates by different states for various reasons that are not addressed by the SST. However, there may be some benefit to remitting the sales/use tax portion via electronic filing.
- If you are a non-profit organization holding tax exemption certificates, SST may not offer any benefits to you.
If you are uncertain as to whether or not SST may benefit you, please contact CCH, Inc. (or SST at http://www.streamlinedsalestax.org) with questions regarding your nexus status, products, or services.
Note: This document incorporates research based on source and reference materials published by the Streamlined Sales Tax Governing Board, Inc. promoting a streamlined sales tax system for the 21st Century.
BTW - don't forget to check these other Streamlined Sales Tax (SST) resource pages on SalesTaxSupport.com: