Streamlined Sales Tax (SST) for DtC Alcohol Shippers: Your Questions Answered

Charles Maniace
September 14, 2020

In a recent blog post penned by Alex Koral, Sovos announced that the Streamlined Sales Tax (SST) Governing Board authorized a new contract with SST Certified Service Providers (including Sovos ShipCompliant) that has the potential to make sales tax compliance more manageable and affordable for qualifying direct-to-consumer (DtC) shippers. Since the blog was published, questions have been pouring in and we thought it might be helpful to highlight some answers here.

How are DtC alcohol shippers suddenly now eligible to participate in the SST Model 1 program?

The first and all subsequent iterations of SST Contract with Certified Providers prohibited the following types of companies from fully participating in the program:

[Companies] required to register and collect sales or use tax in the Streamlined State as a statutory requirement for the seller or an affiliate of the seller to be able to sell, ship or deliver a particular type of product into the Streamlined State.

As businesses operating in the DtC alcohol shipping space well know, many states require the DtC seller to register, collect, and remit sales tax as a statutory requirement for getting a DtC shipping license. Under the old contract, this requirement effectively rendered them ineligible. However, Sovos (along with the other CSPs) worked to align the states to removing this language in the newest contract, which means the preclusion from participating will not apply starting on January 1, 2021.

How do I know if I am eligible to participate in this program? 

Eligibility is defined by whether or not your company meets the criteria to be considered a “CSP Compensated Seller” in any of the 24 SST member states. Those criteria are as follows:

  • no fixed place of business for more than thirty (30) days in the Streamlined State;
  • less than $50,000 of property in the Streamlined State
  • less than $50,000 of Payroll in the Streamlined State
  • less than twenty-five percent (25%) of total property or total payroll, as defined below, in the Streamlined State
  • not collecting sales or use tax in the Streamlined State as a condition for the seller or an affiliate of the seller to qualify as a supplier of goods or services to the Streamlined State

It’s important to remember that eligibility is determined on a state by state basis. So, for example, if your company has a physical headquarters in Washington you will not be eligible to participate for the state of Washington but could participate with respect to the other 23 states.

Of course, the requirements also specify that you need to use a Certified Service Provider for your sales tax compliance, but if you’re using Sovos ShipCompliant, you don’t need to worry about that.

How does participation in the SST program save me money?

In short, the Certified Service Providers receive compensation directly from the states based on a percentage of tax collected. In turn, we agree not to charge our customers for implementation, determination, filing and notice handling as it relates to sales tax in the SST member states. However, it’s important to understand that the SST agreement is exclusive to sales tax and only applies to the 24 SST states. Sales tax compliance for non-member states and support for other DtC compliance requirements are not included. 

How does participation in the SST program save me time?

Utilizing tax automation to manage your sales tax compliance requirements is in and of itself an efficient choice, but when eligible clients use a Certified Service Provider, the CSP becomes the taxpayer of record in many respects and serves as the main point of contact during the member state audit process.

Can I take advantage of this program and continue filing sales tax on my own?

Under the rules, in order to be a full participant that takes advantage of CSP compensation and audit protection, Sovos ShipCompliant must perform the filing function (as well as determination, remittance, and notice handling) as a managed service. However, adding automated sales tax filing support in the SST member states to an existing Sovos ShipCompliant account would be compensated by the states under the SST agreement, meaning no additional cost to you.

Is participation open to brewers and distillers, or just wineries?

The contractual provision prohibiting DtC wineries from participating applied equally to brewers and distillers who were likewise often required to collect sales tax as a prerequisite to being permitted to sell direct-to-consumer. Its removal should have the same impact on distillers and brewers, likewise rendering them eligible to participate.

Right now this only applies in 24 states, is there a chance that more states will join SST?

It’s certainly possible. While no states have joined SST since Georgia joined a few years back, SST is considering proposals that would allow new states to join. Also, we actively work with interested state governments that may not be inclined to join SST but are nonetheless interested in establishing their own program. The first state to create such a program is the Commonwealth of Pennsylvania, where Sovos is also a certified provider.

When does this all start?

As mentioned above, the new contract was just recently ratified by the SST Governing Board and the new provisions (including the change that allows DtC alcohol participation) take effect on January 1, 2021. 

If I am interested in learning more, what do I do next?

Watch this space for more information as the January 1 effective date draws nearer. (You can subscribe for once per week blog updates here.)

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Author

Charles Maniace

Charles Maniace is Vice President – Regulatory Analysis & Design at Sovos, a leading global provider of software that safeguards businesses from the burden and risk of modern tax. An attorney by trade, Chuck leads a team of attorneys and tax professionals responsible for all the tax and regulatory content that keeps Sovos customers continually compliant. Over his 15 year career in tax and regulatory automation, he has provided analysis to the Wall Street Journal, NBC and more.
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