Skip to content

Voluntary Streamlined Sales and Use Tax System (SSTP) Up and Running

2 min readBy: Chris Atkins

On October 1, 13 states became full governing members of the State and Local Advisory Council, a governing board that oversees state compliance with the Streamlined Sales and Use TaxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. Agreement (SSUTA). The SSUTA was developed by the Streamlined Sales Tax Project (SSTP), a working group of state revenue officials and industry representatives. The goal of SSTP was to simplify state sales and use tax systems to make remote collection of sales (especially sales made by catalogue or Internet sellers) less onerous for retailers.

13 states are currently full members, meaning that their sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. systems have been adjudged to be in substantial compliance with the SSUTA. 6 more states are associate members, which means that they have taken major steps to comply their sales tax system with SSUTA but have a few more changes to make.

The SSTP was successful because, in the end, it delivered important goals to both the state revenue departments and the business community. The former was concerned about the erosion of the sales tax baseThe tax base is the total amount of income, property, assets, consumption, transactions, or other economic activity subject to taxation by a tax authority. A narrow tax base is non-neutral and inefficient. A broad tax base reduces tax administration costs and allows more revenue to be raised at lower rates. caused by purchases made through catalogues or over the Internet—taxes which are essentially uncollectable because of the Quill decision. The latter was concerned about the complexity of complying with over 7,000 distinct state and local sales tax jurisdictions. By simplifying the system and making it easier to collect sales taxes, both sides got what they wanted.

What do the sales tax systems in the governing board states look like? As it turns out, the states currently in the system have higher rates and higher tax burdens than average. See the table below:

State Sales Tax Rate Sales Tax Collections Per Capita Sales Tax Collections per $1000 of personal income
Indiana 6 $ 679.51 36.82
Iowa 5 $ 586.59 26.64
Kansas 5.3 $ 693.30 32.11
Kentucky 6 $ 580.12 35.59
Michigan 6 $ 762.43 33.46
Minnesota 6.5 $ 771.64 34.60
Nebraska 5.5 $ 820.54 35.25
New Jersey 6 $ 687.20 26.89
North Carolina 4.5 $ 476.40 29.04
North Dakota 5 $ 569.13 35.94
Oklahoma 4.5 $ 421.25 23.86
South Dakota 4 $ 706.02 36.66
West Virginia 6 $ 540.34 44.90
Arkansas 6 $ 715.93 41.44
Nevada 6.5 $ 978.28 48.49
Ohio 6 $ 591.25 30.22
Tennessee 7 $ 926.85 41.76
Utah 4.75 $ 632.54 33.23
Wyoming 4 $ 848.79 33.14
Average of SSTP states 5.50 $ 683.58 34.74
50-state average 4.78 $ 635.96 30.31
Difference +0.72 +47.62 +4.43

I will leave it up to the reader to interpret these facts in regards to the claims of sales tax erosion by state revenue officials. From their perspective, is the SSTP a system designed to stop sales tax erosion, or is it a system designed to maintain high sales tax rates and collections?