WASHINGTON – States and e-commerce retailers may soon be flocking to register with the Streamlined Sales Tax Governing Board as they begin implementing remote sales tax laws upheld last month by the Supreme Court in its South Dakota v. Wayfair decision.
South Dakota’s 2016 law requiring collection of sales taxes if a retailer has at least 200 transactions of $100,000 in online sales in the state over a calendar year was upheld in the ruling and could become a model standard for other states to enact.
Twenty-four of the 45 states with sales taxes are members of the Streamlined Sales and Use Tax Agreement, which Justice Anthony Kennedy said in the 5-4 majority opinion “standardizes taxes to reduce administrative and compliance costs.”
Membership in the organization is voluntary, but the ruling may serve as an impetus for more states to join.
“It requires a single, state level tax administration, uniform definitions of products and services, simplified tax rate structures, and other uniform rules,” Kennedy wrote. “It also provides sellers access to sales tax administration software paid for by the state. Sellers who choose to use such software are immune from audit liability.”
The Streamlined Sales Tax Governing Board has scheduled a two-day emergency meeting for July 19-20 in St. Paul, Minn., to discuss the future role it will play even for states that are not members.
The organization already has more than 3,900 e-commerce retailers who registered prior to the court decision that overturned the requirement that a retailer must have a physical presence in a state before it can be required to collect sales taxes.
The Streamlined Sales Tax Governing Board also has contracts with seven certified service providers that are allowed by the member states to keep between 2% and 8% of the sales tax they collect from e-commerce retailers. The providers calculate for the retailer whether the item being purchased is taxable in a particular jurisdiction and, if so, the applicable tax rate.
The retailers, in turn, are assured that the correct sales tax is collected and that the service provider will handle any audit notices from the states.
Craig Johnson, executive director of the Streamlined Sales Tax Governing Board, said he’s expecting more companies to apply for certification as service providers as a result of the ruling.
An arrangement could be made to certify those service providers in other states.
Max Behlke, director of budget and tax policy for the National Conference of State Legislatures, said the Streamlined Sales Tax Governing Board needs to decide what its future role will be.
“The court did not say that you have to be a member of streamline,” Behlke said. “So I think it’s going to be what are the most important aspects of what we do here, whether it is central registration, or auditing and verifying the technology companies as certified service providers for other states.”
Johnson offered a similar view. “Even if other states won’t become full members, what can we do to get other states to join our central registration?” he asked.
Many states haven’t announced dates for implementing the court ruling, according to the National Conference of State Legislatures.
But at least three of them – Hawaii, Idaho and Kentucky – began requiring out of state e-commerce retailers to collect sales tax as of July 1.
Alabama, Massachusetts, North Dakota and Wisconsin are beginning Oct. 1 while Iowa and Louisiana have set Jan. 1 as their target dates, the NCSL said.
“We will aggregate implementation dates for all states on our website,” said Johnson.