The Streamlined Sales Tax System Project
The Streamlined Sales Tax Project is an effort created by state governments, with input from local governments and the private sector, to simplify and modernize sales and use tax collection and administration. The Project’s proposals will incorporate uniform definitions within tax bases, simplified audit and administrative procedures, and emerging technologies to substantially reduce the burdens of tax collection.
Currently, thirty-eight states are involved in the project and thirty-two states are voting participants because their legislatures have enacted enabling legislation or their governors have issued executive orders or a similar authorization.
Businesses-including national retailers, trade associations, manufacturers, technology companies, and others have actively participated in the Project meetings by reviewing proposals and providing feedback to the states on key elements of the new system.
The key features of the Streamlined Sales Tax System include:
- Uniform definitions within tax bases. Legislatures still choose what is taxable and exempt but will use the common definitions for key items in the tax base.
- Simplified exemption administration for use- and entity-based exemptions. Sellers are relieved of the "good faith" requirements that exist in current law and will not be liable for uncollected tax. Purchasers will be responsible for incorrect exemptions claimed.
- Rate simplification. States will be responsible for the administration of all state and local taxes and the distribution of the local taxes to the local governments. State and local governments will use common tax bases and accept responsibility for notice of rate and boundary changes. States will be encouraged to simplify their own state and local tax rates.
- Uniform sourcing rules. The states will have uniform sourcing rules for all property and services.
- Uniform audit procedures. Sellers who participate in one of the certified Streamlined Sales Tax System technology models will either not be audited or will have a limited scope audit, depending on the technology model used.
- Paying for the system. To reduce the financial burdens on sellers, states will assume the responsibility for implementing the Streamlined Sales Tax System.
The Streamlined Sales Tax System will provide sellers the opportunity to use one of three technology models listed below.
- Model 1 - A Certified Service Provider performs all of the seller’s sales tax function;
- Model 2 – A Certified Automated System to perform only the tax calculation function; or
- Model 3 - Larger sellers with nationwide sales that have developed their own proprietary sales tax software may select to have their own systems certified by the state.
Participation in the system by both vendors and states is voluntary. Also, registration by vendors in the Streamlined Sales Tax System does not infer nexus for business activity or income tax purposes.
For more information on this topic, visit the Streamlined Sales Tax Project site.