Streamlined sales tax up and running - and affecting many businesses.

• Author: Hogroian, Ferdinand

The Streamlined Sales Tax Governing Board held its initial meeting on Oct. 1,2005, marking the launch of a new era in state and local sales and use tax administration. For over five years, states have been working together to develop "a sales and use tax system that radically simplifies sales and use taxes" as noted in the mission statement of the Streamlined Sales Tax Project (SSTP). While the streamlined sales tax (SST) system could still be fairly described as a work in progress, the states have come a long way in addressing some of the key problems businesses face in sales tax compliance. Businesses and their advisers need to understand the SST system if they are to take advantage of these substantial, broad-ranging changes and stay in compliance.

Which States Are Involved?

Perhaps one of the most common misperceptions of the sales tax streamlining effort is that it is limited to a small number of states. In fact, every state that imposes a sales tax, except for Colorado, is a participant in the SSTP. Now that the governing board has been constituted, these states will continue to have substantial input into the development of model SST tax laws, regulations and policies, through a state and local advisory council. Further, SST compliance--or adoption of its model laws and policies--has spread to 18 states as of the Oct. 1, 2005 launch date for the governing board. The governing board's 13 "full member" states are Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, New Jersey, North Carolina, North Dakota, Oklahoma, South Dakota and West Virginia. The five current "associate member" states are Arkansas, Ohio, Tennessee, Utah and Wyoming; Nevada become an associate member as of 2006.

Broad Amnesty Has Peaked Interest

As noted above, the streamlining process has been ongoing, with enough complexity and obscurity to confuse--and perhaps tire--all but the largest businesses and firms that regularly attend meetings and participate in conference calls and the like. However, a major amnesty program--unprecedented in the history of sales and use taxes--has increased the project's profile dramatically, causing a broad array of businesses to consider the SST system for the first time.

To qualify for amnesty, a seller must register through the SST registration system, available at www.sstregister.org/ sellers. In return for registration in all full-member states within the first year--between Oct. 1, 2005 and Sept. 30, 2006--sellers will be completely forgiven on uncollected or unpaid sales or use taxes for all periods before the registration, from each of the states. Further, sellers can register in any associate member state, although registration in such states is expected within one year of the date that the associate member state obtains flail membership.

Caveats: Amnesty has some important limits. It only applies to sales or use taxes due from the seller in its capacity as a seller, not to such taxes due from the seller in its capacity as a buyer (e.g., use tax on promotional items). In addition, taxes other than sales and use taxes are not covered by the amnesty; thus, voluntary disclosure agreements with the member states, as well as nonmember states where there may be a liability, should be considered. Anmesty also does not apply to matters for which the seller has received an audit commencement notice, making...