Sales & Use Tax is complex and growing more so by the day. The number of jurisdictions, tax forms and rate changes makes managing these processes enough to deplete the resources of even the most experienced accounting and finance teams.
States have been working to alleviate the burden on companies by providing programs that allow organizations to use certified professionals, like Sovos, to compile and remit returns on their behalf. All free of charge assuming you meet the required criteria.
To help you get started, we’ve mapped out the critical elements of these programs that you will need to consider in applying for and using these services for sales tax purposes.
Q: What is a “CSP” and how does it relate to Streamlined Sales Tax (SST?)
A: The term “CSP,” short for Certified Service Provider, is a concept created by the Streamlined Sales Tax Governing board and refers to a tax compliance technology provider certified to ensure compliance with necessary sales and use tax regulations. While the Streamlined Sales Tax (SST) certification is open to all tax technology providers, only a small handful have opted to participate in this rigorous process which requires a comprehensive review of both technology and tax content. When a “volunteer seller” uses a “CSP” to calculate and remit sales tax in any of the SST member states, those services can be provided through state compensation and the seller is afforded significant audit protection. However, all clients benefit from using a provider that has had their content certified as accurate by the state.
Some non-SST member states, like Pennsylvania, have created or are developing their own CSP programs.
Q: How do I know if I qualify as a volunteer seller?
A: We have developed a Volunteer Seller Assessment to help you determine your organization’s status in each state you conduct business, the basic criteria are as follows:
- No fixed place of business within the state
- Less than 25% of total Property in the state (see legal definition of Property)
- Less than 25% of total Payroll in the state (see legal definition of Payroll)
- Organization is not required to collect sales or use tax as a condition of qualifying to be a Supplier of Goods or Services to the state
- Organization does not have a statutory requirement to register and collect sales or use tax in order to sell, ship, or deliver your products into the state
Q: Are sellers purchases (consumer’s use tax) covered under the SST initiative?
A: No. The reason why Streamlined Sales Tax exists is to simplify the collection and remittance of sales and use tax. But, when they refer to “use tax” they really mean “seller’s use tax” which is charged by remote sellers to in-state customers and not “consumer’s use” tax which is self assessed directly by buyers when tax is not properly charged by the seller. While in-state buyers remain obligated to self assess consumer’s use tax when the seller does not collect tax, and while the Sovos tax engine supports the automation of consumer’s use self assessment, those transactions are not subject to SST benefits.
Q: What if I am already registered with an SST member state but want to use a CSP for my sales tax processes?
A: If a company is already registered to collect and remit sales tax directly but otherwise qualifies as a “Voluntary Seller” they remain able to utilize a CSP under the SST program. In other words, if your company did not know about the SST CSP offering and is currently managing collection and remittance on your own in any of the applicable states, you can still decide to use a CSP and in doing so you remain qualified for CSP benefits. Your CSP can assist with any changes needed to your existing registration because of this shift to working with a CSP.
Q: Can I qualify to participate in these programs if I am a marketplace facilitator?
A: Marketplace facilitators are finding themselves in a challenging spot. In what we have been calling the Wayfair “second wave,” most every state that has passed a law or rule requiring remote sellers to collect and remit tax has also passed a law or rule requiring marketplace facilitators to collect and remit tax for any transaction that happens over their platform. Of course, the particulars of that requirement vary significantly from state to state.
Q: Can I qualify for these programs if I am making sales through marketplaces, such as Amazon?
A: Short answer is, It depends… transactions by a “marketplace seller” where the “marketplace facilitator” determines the tax and collects and remits are not eligible for CSP compensation through the marketplace seller – because oftentimes the seller is just reporting a non-taxable sale.
Other times, they do nothing at all. However, if a marketplace seller also sells directly it’s quite common for them to use a CSP under the Model 1 program for those sales.
Q: How do I get started?
A: You can start by reading the information available on the SST and PA CSP programs on the Sovos website. After that, feel free to contact us directly. Our sales and use tax solution teams are fully versed in CSP programs and can help chart a course of action enabling your compliance through the CSP programs.