Sales & Use Tax
Retail sales tax is a tax on sales of retail of goods to end consumers. Use tax is essentially the same as a sales tax but is applied not where a product was sold but where a merchant bought a product and then converted it for its own use, without having paid tax when it was initially purchased.
South Dakota v. Wayfair
On June 21 2018, the United States Supreme Court overturned Quill Corp v. North Dakota in South Dakota v. Wayfair. This means that states can require certain retailers with no physical presence, such as online sellers, to collect and remit the applicable sales or use tax on sales delivered to locations within their state.
Nexus (economical or physical presence) is the factor which determine if a remote seller is obligated to collect sales tax on sales to particular jurisdiction. Before Amazon built distribution centers in most states, they used not to callow the sales taxes but now they do since they have physical presence or “nexus” in most states.
Streamlined Sales Tax (SST)
The goal Streamlined Sales Tax group is to simplify and modernize sales and use tax collection and administration in the United States. The SST technical committees developed and XML based schema with the help of the FTA e-standards group. The SST XML Schema allows states to develop systems to process sales tax returns and payments from sellers. It allows sellers to file and pay to participating states using the same process. Sellers can develop their own XML system or they can hire CSP to process their transactions real-time tax determination, tax returns filing and payments on their behave. Sellers must first register with the SST system.
The Streamlined Sales and Use Tax Agreement (SSUTA) became effective on October 1, 2005. The current full members members of the SST are: Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, Nevada, New Jersey, North Carolina, North Dakota, Ohio, Oklahoma, Rhode Island, South Dakota, Utah, Vermont, Washington, West Virginia, Wisconsin, Wyoming
Sales Tax Determination
Real time determination of all sales tax due on a specific product as part of an invoice. When you checkout your cart on a website, you see tax included line, this sales line is sales tax determination. The e-commerce website contacted a tax engine to determine the sales due on an invoice before payment. An e-commerce or ERP communicate with sales tax certified service provider system to request sales tax calculation on each transaction or invoice before is saved.
Sales Tax Collection
Sellers collect sales tax on behave of the state and other jurisdictions. Sellers file and remit sales taxes to the state and other jurisdictions at the end of each tax cycle like monthly or quarterly. Retailers must obtain retailer sales tax license before collecting taxes.
Sales Tax Filing
At the end of each tax cycle, sellers are required to file total cross sales and remit collected taxes to the state and other jurisdictions. Most of states offer portal data entry sales & use tax filing. In addition to portal filing, SST states offer automated filing through the SST register system. Some states require sellers to provide list of states to the state. Texas and Virginia require EDI/CSV file upload portal.
Sales Tax Mandatory Data Fields
Mandatory data fields to calculate sales and use tax includes customer address, product price, and product category. Mandatory field to file sales & use tax returns are total gross sales and collected tax total.