What Is SST and How Can It Help Your Business?

Gail Cole | June 13, 2019

States won the right to tax remote sales in South Dakota v. Wayfair, Inc. (June 2018) after a battle long fought. The Streamlined Sales and Use Tax Agreement was instrumental in that victory, and yet many people still don’t know much about it. Read on to learn how Streamlined Sales Tax (SST) came to be, how it helped secure the repeal of the physical presence rule, and how it can benefit businesses.

How SST came to be

The Streamlined Sales and Use Tax project was created nearly 20 years ago in response to state efforts to tax remote sales, the complex and burdensome nature of sales and use tax laws, and the emergence of ecommerce.

States’ efforts to tax remote sales were thwarted for decades — most notably by the Supreme Court of the United States in National Bellas Hess v. Department of Revenue (1967) and Quill Corp. v. North Dakota (1992). In both instances, the court found a physical presence in a state to be a requisite for sales tax collection.

The burdensome nature of sales tax compliance was one of the reasons cited by the court in these decisions. As it noted in National Bellas Hess, “The many variations in rates of tax, in allowable exemptions, and in administrative and record keeping requirements could entangle … interstate business in a virtual welter of complicated obligations.” 

Sales tax laws can indeed be bewildering!

If states took that message to heart, they also remained fiercely independent. They weren’t spurred to change until after the birth of ecommerce, when the physical presence rule threatened to significantly impact sales and use tax revenue — as indeed it has.

Motivated by mounting online sales and declining sales tax revenue, state and local government officials worked with members of the business community to simplify state and local sales tax systems. Their goal was to make sales tax compliance less burdensome for all businesses, and to encourage out-of-state sellers to voluntarily collect and remit sales tax.

The result of their efforts was the Streamlined Sales and Use Tax Agreement, which provides “a road map” for states seeking to simplify and modernize sales and use tax administration. It requires member states to adopt:

  • State-level administration of sales and use tax collections
  • Uniformity in the state and local tax bases
  • Uniformity of major tax base definitions
  • Central, electronic registration system for all member states
  • Simplification of state and local tax rates
  • Uniform sourcing rules for all taxable transactions
  • Simplified administration of exemptions
  • Simplified tax returns
  • Simplification of tax remittances
  • Protection of consumer privacy

These simplification measures have been adopted by 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, an associate member, adheres to all the above except uniform sourcing.

How SST helped bring down the physical presence rule

It was an SST member state that successfully challenged the physical presence rule in South Dakota v. Wayfair, Inc.

Wayfair recap: In a direct challenge to the Supreme Court rulings in National Bellas Hess and Quill, South Dakota imposed a sales tax collection obligation on businesses with economic activity but no physical presence in the state (economic nexus). The inevitable ensuing challenge made it to the Supreme Court. This time, to the surprise of many, the state won.

The court cited three aspects of South Dakota’s tax system that appeared “designed to prevent discrimination against or undue burdens upon interstate commerce”:

  • The economic nexus law protects small sellers (those with less than $100,000 in sales or fewer than 200 transactions in the state in the current or previous calendar year)
  • The economic nexus law prohibits retroactive enforcement
  • South Dakota has adopted the Streamlined Sales and Use Tax Agreement (standardizing sales and use taxes to reduce administrative and compliance costs)

The Wayfair ruling also noted that South Dakota “provides sellers access to sales tax administration software paid for by the state” through its membership in the SST.

More than 40 states have adopted economic nexus laws since the Wayfair ruling, including 23 of the 24 SST states. In fact, as of this writing, Kansas, Florida, and Missouri are the only states with a general sales tax that haven’t implemented some sort of economic nexus law (the laws in Massachusetts and Ohio only apply to internet vendors). In other words, it’s becoming increasingly difficult to avoid economic nexus. 

For businesses required to collect sales tax in some or all SST states, there are benefits to registering through the SST.

How SST can benefit your business

Sales tax compliance in SST states is less burdensome for all remote sellers because of the simplification measures these states have taken. It can be even less so for businesses that register in one or more SST state(s) through the Streamlined Sales Tax Registration System; such sellers can outsource many aspects of sales tax compliance to a Certified Service Provider (CSP).

CSP services are provided free of charge to volunteer sellers in SST states (the states pay the CSP for their services). To qualify as a volunteer seller, a business must meet the following criteria during the immediately preceding 12-month period:

  • 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 percent of total property or payroll in the state
  • Additional criteria

Having economic nexus in an SST state doesn’t disqualify a seller from obtaining volunteer status and receiving free CSP services.

Volunteer sellers receive registration services and registration updates, tax calculation services, free monthly return preparation and filing, audit support (member states must go through the CSP when auditing a volunteer seller), and liability relief.

Sales tax compliance is challenging in all states, even those that are members of the Streamlined Sales and Use Tax Agreement. Sales tax software can help simplify it. And for volunteer sellers in SST states that use a CSP, those services are free. Learn more.


compliance  /  tax

Written by:

Gail Cole
Gail Cole

Gail Cole has been researching and writing about sales tax since 2012. She has a penchant for uncovering unusual tax facts and endeavors to make complex sales tax laws more digestible for experts and laypeople alike.