PPB March 2019

of transactions, or both. Approximately 20 states with economic nexus share South Dakota’s $100,000 in sales, 200 transactions threshold. Remote sellers that have less than $100,000 in sales or fewer than 200 transactions in the state usually don’t have to collect and remit sales or use tax in any of those 20 states. While it might appear relatively easy for a distributor that sells only in its home state and South Dakota, distributors and manufacturers with customers in multiple economic nexus states face real challenges. Although most economic nexus states closely follow South Dakota’s example, several have adopted different thresholds. For example: • In Alabama, a remote seller must do more than $250,000 in sales in the state and engage in certain activities (e.g. solicitation) to trigger economic nexus. • In Connecticut, the threshold is at least $250,000 in revenue and 200 or more “retail” sales into the state as well as a systematic solicitation in the state. • In Minnesota, the economic nexus threshold is 10 or more sales totaling $100,000 or 100 or more “retail” sales. Obviously, determining when economic nexus has been established in a state is complicated by this lack of uniformity. And, once economic nexus has been established, the process for registering to do business varies from state to state. Becoming A Sales Tax Collector The operators of many promotional products businesses fail to appreciate their duty and the legal obligations they face as a trustee or collector for sales and use taxes. Since the business merely acts as a trustee in collecting and remitting the proper amount, it is clear the taxes collected do not belong to the business. Before any professional products supplier or distributor can collect and remit tax in a state where it has established economic nexus, it must first obtain a sales tax permit (i.e., a seller’s permit). Finding what each state requires and then properly setting up shop in a state takes time. Fortunately, some may find help under the so-called Streamlined Sales And Use Tax Agreement (SSUTA). Streamlined Sales Tax As mentioned, sales tax laws are extremely complex. Products and services taxed vary from state to state as do sales tax rates, rules and regulations. Further complicating matters, there are more than 12,000 local sales and use tax jurisdictions in the U.S. Few promotional products suppliers, manufacturers or distributers are satisfied staying within the confines of state borders. Efforts by the states to require out-of-state sellers to collect and remit sales tax have long been contentious. The ironically-called SSUTA was born of state efforts to tax remote sales, the complex nature of sales taxes and the emergence of ecommerce. Unfortunately, the 23-state SSUTA—launched in 2000 to simplify sales tax administration and minimize the burden of complying—has failed to attract a single new member in the seven-month period following the Wayfair ruling. In fact, not a single state has joined since 2014. However, any promotional products business can register to collect and remit sales tax in all 23 states that are currently members of the Streamlined Sales Tax Registration System. There is no cost for sellers collecting only in SST states, and reduced costs for sellers collecting in both SST and non- SST states. The SSUTA attempts to simplify sales and use tax administration for all sellers through the following: • Central electronic registration system for all member states • Uniformity in the state and local tax bases • Uniformity in major tax base definitions • Simplification of state and local tax rates • Uniform sourcing rules for all taxable transactions | MARCH 2019 | 93 THINK