What is Streamlined Sales Tax, and why should you care?

Do you know about the Streamlined Sales and Use Tax Agreement? If you collect and remit sales and use tax in multiple states, you should. Any business that qualifies as a volunteer seller in Streamlined Sales Tax (SST) states may obtain sales tax calculation and reporting services from a Certified Service Provider, like Avalara, at no cost.

SST grew out of the complexity of sales and use tax compliance, the emergence of ecommerce, and states’ desire to tax remote sales. 

The Streamlined Sales Tax Project was created by the National Governors Association and the National Conference of State Legislatures in the fall of 1999. Online sales were on the rise at the time, but states could only require a retailer to register for sales and use tax if the business had a physical presence in the state.  

The Supreme Court of the United States had twice ruled — in National Bellas Hess v. Illinois (1967) and Quill Corp. v. North Dakota (1992) — that state and local sales tax compliance was too complicated to inflict on out-of-state businesses. So, states participating in the Streamlined Sales Tax Project decided to streamline sales tax compliance.

State and local governments worked with the business community to simplify the complex sales and use tax systems that led to the Supreme Court rulings in National Bellas Hess and Quill. The resulting Streamlined Sales and Use Tax Agreement works to make sales tax collection and administration in SST states less costly and burdensome for businesses.

There are 23 full member states: Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, Nevada, New Jersey, North Carolina, North Dakota, Ohio, Oklahoma, Rhode Island, South Dakota, Utah, Vermont, Washington, West Virginia, Wisconsin, and Wyoming. Tennessee is the only associate member state. 

SST was a national effort originally conceived by 44 states. Some of those states are still working toward full membership.

The U.S. Supreme Court overruled the physical presence rule with its decision in South Dakota v. Wayfair, Inc. on June 21, 2018. Physical presence in a state still triggers a sales and use tax collection obligation, but now states can also require remote sellers to collect sales taxes. 

As of January 1, 2023, every state with a sales tax requires certain out-of-state sellers to collect and remit sales tax based on their sales activity in the state, or economic nexus.

Each state’s economic nexus law is unique. Some states require remote sellers to register if they make just 200 separate transactions or $100,000 in sales in the state in the current or previous calendar year. California and Texas have set an economic nexus threshold of $500,000 in annual sales, while in New York, the threshold is $500,000 and 100 transactions in the state in the preceding four sales tax quarters. 

Learn more about state economic nexus laws.

Registering through Streamlined Sales Tax can simplify sales tax collection in SST states, especially for retailers doing business in multiple SST states. Indeed, the Wayfair ruling listed South Dakota’s membership in SST as one of three reasons* South Dakota’s economic nexus law isn’t an undue burden on remote sellers.

Furthermore, businesses that qualify as volunteer sellers, explained in more detail below, can avoid the standard fees for registration, transactions, and filing in SST member states when they use a Certified Service Provider (CSP) like Avalara.

The Streamlined Sales Tax Governing Board developed a road map for states looking to modernize sales and use tax administration. SST member states must have:

• A central, electronic registration system 
• Consumer privacy protection 
• Simplified administration of exemptions 
• Simplified state and local tax rates 
• Simplified tax remittances and returns 
• State-level administration of sales and use tax collections (no self-collecting local jurisdictions) 
• Uniform state and local tax bases 
• Uniform sourcing rules for all taxable transactions 
• Uniform sales tax base definitions and rules

All retailers benefit from the simplification measures above, and there may be additional perks for remote sellers that register through SST. For example, Tennessee currently provides a tax amnesty program for all sellers that register through the Streamlined Sales Tax Registration System, or SSTRS (subject to limitations).

There are even more benefits for businesses that qualify as volunteer sellers. 

To qualify as a volunteer seller in a member state, your business must meet the following criteria during the 12-month period immediately preceding the date of registration with the member state:

• No fixed place of business for more than 30 days in the state 
• Less than $50,000 of property in the member state 
• Less than $50,000 of payroll in the state 
• Less than 25% of total property or payroll in the state 
• Additional criteria

Having economic nexus in a state doesn’t automatically disqualify a business from obtaining volunteer status.

What’s the benefit of being a volunteer seller?

Volunteer sellers can obtain certain CSP services at no cost in Streamlined Sales and Use Tax Agreement member states. CSPs may charge for services not covered by the CSP contract.

It’s possible for a business to qualify as a volunteer seller in one SST state but not another. Should you use them, expect to pay for CSP services in any SST state where you are not a volunteer (aka, CSP-compensated) seller.

The Streamlined Sales Tax Governing Board has certified the accuracy of a handful of sales tax software businesses, including Avalara. SST states compensate Certified Service Providers for providing the software and services needed to set up and integrate its Certified Automated System (CAS) with retailers’ systems, calculate the tax due, prepare and file required returns, remit the tax due, and more.

Businesses that use software certified by SST and qualify as an SST volunteer seller typically enjoy:

• No SST registration fees in participating states 
• No calculation fees in participating states 
• No monthly filing fees in participating states 
• Audit protection in participating states

Automating sales tax compliance facilitates sales tax management for any business required to collect sales tax in multiple states. In SST states, there are added benefits to working with a CSP, both for non-volunteer and volunteer sellers.

As a CSP — one of the first certified by SST — Avalara must meet rigorous standards for data processing and management of sales tax information. We can help you with all aspects of sales tax compliance, from determining where you have sales tax nexus and an obligation to collect sales tax, to audit response.

Learn more about working with Avalara in SST states.

*South Dakota law also “affords small merchants a reasonable degree of protection” by providing an exception for sellers with less than $100,000 in sales in the current or previous calendar year; and it prohibits retroactive application of its economic nexus law.

This post has been updated. It originally published on April 21, 2019.