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Being Out of Compliance with SSUTA

  • Oct 22, 2012 | Gail Cole

Earlier this week, the Governing Board of the Streamlined Sales and Use Tax Agreement determined that Nevada and Minnesota were out of compliance with SSUTA. Good to know. But what exactly does it mean?

Near the end of the last century, forty-four states in the union, the District of Columbia, and members of the business community joined efforts to create the SSUTA. The goal was to level "the playing field so that local 'brick-and-mortar' stores and remote sellers operate under the same rules" by encouraging "'remote sellers' selling over the internet and by mail order to collect tax on sales to customers living in the Streamlined states."

To date, twenty-four states have passed conforming legislation: Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, Nevada, New Jersey, North Carolina, North Dakota, Ohio, Oklahoma, Rhode Island, South Dakota, Tennessee, Utah, Vermont, Washington, West Virginia, Wisconsin and Wyoming. California, Florida, Hawaii, Illinois, Maine, Massachusetts, Missouri, Texas and Virginia currently have conforming legislation on the table.

The Streamlined Sales Tax website, www.streamlinedsalestax.org, reveals that SSUTA was created "to simplify sales tax collection." It's a big job. The 1992 Supreme Court case Quill Corp. v. North Dakota determined that a state may not require a seller without a physical presence in the state to collect sales tax because "the existing system was too complicated… ."

In an effort to make state tax laws more manageable, SSUTA "defines sixty-nine different administrative terms and products and services that states either tax or exempt." All local governments are required to "tax and exempt the same products and services as the state." Each Streamlined state must provide businesses access to databases that list the tax rate for every local jurisdiction and match tax rates to zip codes. States provide a central point of administration for all state and local sales and use taxes, and states certify the accuracy of their databases.

Each year, the Governing Board ensures that Streamlined states are in compliance by reviewing recertification documents. Section 805 of the SSUTA reads:

"A state is in compliance with the Agreement if the effect of the state's laws, rules, regulations, and policies is substantially compliant with each of the requirements set forth in the Agreement." (SSUTA p 109)

If a state is found to be noncompliant, it must "submit a statement of non-compliance to the governing board … [that] shall include any action or decision that takes such state of out compliance with the Agreement and the steps it will take to return to compliance. " (SSUTA, p 109)

Minnesota "was declared out of compliance (see Annual Review Spreadsheet 2012, under Minnesota) because the definition of prepared food includes food sold with eating utensils in an unheated state by weight or volume as a single item, but exempts ready-to-eat meat and seafood in an unheated state sold by weight."  Minnesota is working towards resolution of this issue, and the Governing Board of the SSUTA finds that Minnesota is in substantial compliance regardless of this issue.

Nevada was found to be out of compliance (see Annual Review Spreadsheet 2012, under Nevada) for: failure to provide citations for the provision related to the effective dates related to catalog sales; failure to provide a statute reference; and failure to implement ACH credit payments. The state cannot address these issues until the Nevada Legislature meets in February, 2013. This is not the first time Nevada has been found out of compliance; the state was found to be "not in substantial compliance with the Streamlined Sales and Use Tax Agreement in 2009."

A state may be issued sanctions when found to be out of compliance. Sanctions include penalties and expulsion from SSUTA. That said, no member state can be sanctioned "for failing to be in compliance with any term of the Agreement that the state has adopted … [if] the member state comes into compliance with the interpretation of the governing board by amending its statutes before the later of the first day of January at least two years after the issuance of the judicial decision or the first day of a calendar quarter following one full session of the state's legislature."

Nevada and Minnesota will both attempt to resolve their issues of non-compliance as soon as they can.

Read about SST and Noncompliance here.

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Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.