STREAMLINED SALES TAX REGISTRATION
After starting a business, you may need to register and collect sales tax from states other than the one your business is primarily located in. This usually happens in one of two instances in which your business has economic sales tax nexus.
WHAT IS NEXUS?
This is where your business has sufficient economic connection to a state, and in turn, that state has the right to impose a sales tax liability on your business. The first situation arises if you have economic nexus by way of physical presence.
The following are the main criteria that will govern if your business has physical presence within a given state:
- The business’s primary location (online store, storefront, office etc.) where it conducts operations is located within your home state
- The ownership or staff of the business (including sales people, contractors or agents) enter that state to conduct business activities
- Personal property owned or leased is warehoused in that state
- You sell products for shipment within that state (intrastate commerce)
- You want to hire employees or contractors in that state
- You own a wholesale company that sells products for resale use in that state (in most wholesale trade shows and markets it will be required to provide a Sales Tax Permit Number in order to participate)
The second situation arises if you have economic nexus by way of “Remote Seller Nexus”. A remote seller is any individual or business that sells taxable products or services through telephone, mail order, or the internet. A remote seller does not need to have physical presence in a state, but instead meet specific sales and/or transactional thresholds. This nexus stems from the Supreme Court ruling in South Dakota vs. Wayfair. In the Wayfair decision, the Supreme Court ruled that any entity that meets remote seller thresholds must register for and remit sales tax.
The following are the main criteria that will govern if your business has remote seller nexus within a given state: Based on the Wayfair decision, South Dakota passed a remote seller nexus threshold of $100,000 in taxable sales or 200 separate transactions in the preceding or current calendar year. An example of this is if you sold Rolex watches through Amazon, Etsy or Ebay. If you sold 100 watches (each in a separate transaction) for $1000 each (totaling $100,000) then you would meet the remote seller nexus threshold based on sales volume. Therefore, you would be required to register and remit sales tax in South Dakota. Alternatively, if you sold 205 watches (each in a separate transaction) for $400 each (totaling $82,000) then you would meet the remote seller nexus threshold based on transactional volume. Even though you did not meet the sales volume you exceeded the number of transactions. With the exceptions of the states below, all states follow this $100,000 sales volume or 200 separate transactions threshold including the District of Columbia. The states of Alaska, Delaware, New Hampshire, Montana, and Oregon do not currently have a statewide sales tax
|STATE||SALES VOLUME||AND/OR||TRANSACTION LIMIT|
|Arizona||$200,000 in 2019, $150,000 in 2020, $100,000 in 2021||No transactions|
|Kansas||TO BE DETERMINED|
|New Mexico||$100,000||No transactions|
|New York||$100,000||AND||100 transactions|
|North Dakota||$100,000||No transactions|
|South Carolina||$100,000||No transactions|
|STATE||SALES VOLUME||OR||TRANSACTION LIMIT|
|District of Columbia||$100,000||OR||200 transactions|
|New Jersey||$100,000||OR||200 transactions|
|North Carolina||$100,000||OR||200 transactions|
|Rhode Island||$100,000||OR||200 transactions|
|South Dakota||$100,000||OR||200 transactions|
|West Virginia||$100,000||OR||200 transactions|
STREAMLINED SALES AND USE TAX AGREEMENT (SSUTA)
Sales tax is the second most broadly collected revenue stream at the state level, only second to income tax. Even though most states tax the same kinds of goods and services, the administrative procedures and protocols can vary drastically. These systems are governed by legislation that is over 80 years old. It was evident that new legislation would have to be passed to keep up with an ever-changing climate of technologically driven commerce. To keep up with this environment, a multi-state uniform sales tax agreement was put together in an effort to simplify the sales tax administration and collection process. Currently, about half the states in the US have joined the coalition. The following states are currently part of the uniform agreement: Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, Nevada, New Jersey, North Carolina, North Dakota, Ohio, Oklahoma, Rhode Island, South Dakota, Tennessee, Utah, Vermont, Washington, West Virginia, Wisconsin and Wyoming.
The multi-state agreement is meant to benefit both member states and businesses that register to become part of it. From the states perspective, it makes sure that fairness is provided to local businesses and they are able to compete with out of state businesses. Alternatively, it is especially useful for businesses operating in multiple states or “remote sellers” who make sales in multiple states. Businesses can register in as many or as few member states as needed in just one uniform application. The application is a fast and efficient way to register to collect sales and use tax in member states. Once registered you will receive a single “Uniform Sales Tax Number” for use in all member states. It is the equivalent of having a universal seller’s permit (Sales Tax Permit) in all member states.
STREAMLINED SALES TAX REGISTRATION
It is strongly recommended that all new businesses that want to get registered in multiple states (that are included in the Streamlined Agreement), file for their streamlined sales tax number through a Multi-State Uniform Sales Tax Registration Application as it is the easiest and fastest way to apply. For the fastest processing time, please have the following information ready to complete the online application:
Business name, physical/ mailing address & phone number
A short description of the business
The owner or officer’s Information
Register online for your Multi-State Uniform Sales Tax Permit and obtain your Uniform Multi-State Sales Tax Number (Multi-State Tax ID Number). After you complete the online process, you will receive a confirmation of all your important information within 1-2 business days.