Streamlined Sales Tax Project SSTP

1
Streamlined Sales Tax Project (SSTP) Overview
Society for Information Management (SIM) April
13, 2005
Streamlined Sales Tax Project (SSTP)
2
Agenda

• SSTP Overview
• Wisconsin Legislation
• Federal Legislation
• Technology
• Pending Issues

3
Whos Involved

• 45 States DC impose sales tax
• 42 States DC involved in SSTP
• 21 States enacted conforming legislation
• Business community

4
What it does - - Rules

• State level administration of local sales and use
  taxes
• Common state and local tax bases within a state
  after December 31, 2005
• Uniform sourcing rules destination based

5
What it does - - Rules

• Menu of uniform definitions -- legislatures
  decide what is taxable or exempt
• Simplified exemption processing
• Rate simplification with databases
• No caps and thresholds after December 31, 2005

6
What it does - - Rules

• Limited scope audits and certification standards
• Joint audits for large, multi-state businesses
• Hold harmless provisions if use data bases
• Uniform return

7
What it does - - Rules

• Sales tax holidays (guidelines and limited
  defined products)
• One rounding rule
• Common customer refund procedures
• State funding of technology

8
Wisconsin Legislation -- Governors Budget Bill

• Adopt uniform definitions
• Adopt sourcing rules
• Adopt exemption administration provisions (e.g.,
  relieve seller from burden of proof)

9
Wisconsin Legislation -- Governors Budget Bill

• Adopt hold harmless provisions for sellers and
  providers who uses the states taxability matrix
  and rate/jurisdiction database
• Effective October 1, 2005 (interstate agreement
  on January 1, 2006)

10
Federal Legislation

• H.R. 3184 introduced 9-25-03
• S. 1736 introduced 10-15-03
• Authorization to require collection if adopt
  provisions of Streamlined Sales and Use Tax
  Agreement
• Small business exception
• Reasonable seller compensation

11
Technology Implementation

• Central registration system
• Database matching rate to zip codes
• Taxability matrix

12
Technology Implementation

• Model 1 - Certified Service Provider (CSP)
• Model 2 - Certified Automated System (CAS)
• Model 3 - Certification of In-house (Proprietary)
  System
• Continue with system as is

13
Model 1 - Certified Service Provider (CSP)

• States contract with CSPs
• States test and certify CSPs systems
• States compensate CSPs
• Retailer selects CSP to perform all sales tax
  functions
• CSP determines tax due, pays the tax to the
  states, and files the return with the states

14
Model 1 - Certified Service Provider (CSP)

• CSP is liable for tax due with two exceptions
• errors by the states
• fraud by the retailer
• CSP is subject to audit and periodic system
  checks
• Retailer subject to audit on purchases (use tax)

15
Model 2 - Certified Automated Systems (CAS)

• Retailer selects CAS from those available
• Retailer establishes an interface with CAS
• CAS performs calculation of tax due
• States compensate retailer for use of CAS

16
Model 2 - Certified Automated Systems (CAS)

• Person/company who obtained certification of CAS
  from states is liable for failure of CAS
• Person/company who obtained certification of CAS
  is not liable for errors by states
• Retailer is liable for paying tax due and
  accuracy of returns

17
Model 2 - Certified Automated Systems (CAS)

• CAS subject to periodic system checks
• Retailer subject to audit on tax remittance and
  return filing
• Retailer subject to audit on purchases (use tax)

18
Certification of CSPs and CASs by Governing Board

• Contract between Governing Board of states and
  CSPs
• Certification of CASs for determining state and
  local sales and use tax rates, determining
  whether an item is taxable or exempt, any other
  requirement set by Governing Board

19
Compensation

• Model 1 - Monetary allowance to CSP per contract
• Model 2 - All retailers will receive a base rate
  for a period not to exceed 24 months following
  commencement of participation by a retailer

20
Compensation

• Retailers using Model 1 (CSPs) will not get
  vendor discounts otherwise provided in state law
• Retailers using Model 2 (CAS) will get vendor
  discounts otherwise provided in state law

21
Time Line - Model 1 Certified Service Providers
(CSPs)

• Proposals due on 1-3-2005
• Initial approvals 2-15-05
• Certification process completed 8-15-05
• Tentative awards 8-15-05
• Negotiations completed 10-01-05
• Final contracts 10-31-05

22
Time Line - Model 2 Certified Automated Systems
(CASs)

• Some CSPs will provide CASs
• Other CASs will be certified after CSPs certified

23
Pending Issues

• Certificates of compliance
• Governing Board on July 1, 2005
• Interstate agreement on October 1, 2005
• Voluntary collections begin October 1, 2005

24
Pending Issues

• Telecommunication definitions
• Bundling rules
• Exemption processes
• Digital equivalent definitions

25
Contacts

• www_at_dor.state.wi.us
• www_at_streamlinedsalestax.org
• dhardt_at_dor.state.wi.us