Avalara > Blog > Ecommerce > Streamlined Sales Tax: Perhaps the most important sales tax organization you’ve never heard of

Streamlined Sales Tax: Perhaps the most important sales tax organization you’ve never heard of


map of streamlined sales tax states

Updated 4.18.2019

What is Streamlined Sales Tax, and why should anyone care?

The Supreme Court of the United States referenced Streamlined Sales Tax (SST) in its decision in South Dakota v. Wayfair, Inc., which overruled the physical presence rule that long prevented states from imposing a sales tax collection obligation on remote sellers. To understand why, we need to explore its origins: SST was born of state efforts to tax remote sales, the complex nature of sales tax, and the emergence of ecommerce.

Growing businesses are rarely satisfied staying within the confines of state borders, and state efforts to require out-of-state sellers to collect and remit sales tax are always contentious. The Supreme Court of the United States has been asked to weigh in on the constitutionality of remote sales tax multiple times, most famously in three cases: National Bellas Hess v. Department of Revenue (1967), Quill Corp. v. North Dakota (1992), and South Dakota v. Wayfair, Inc. (2018). For states, of course, the third time was the charm.

In National Bellas Hess, the court ruled that a mail-order company could not be compelled to collect and remit sales tax in a state where it had no physical presence. If states were permitted to tax remote sales, it opined, “The many variations in rates of tax, in allowable exemptions, and in administrative and recordkeeping requirements could entangle National's interstate business in a virtual welter of complicated obligations." Quill upheld that decision, finding the physical presence bright-line test of Bellas Hess to be “good law.”

Thus, until the Supreme Court ruling in South Dakota v. Wayfair on June 21, 2018, states were prohibited from taxing sales by businesses with no physical presence in the state.

States may not have liked the rulings in Bellas Hess and Quill, but most couldn’t claim their sales tax laws were not “a virtual welter of complicated obligations.” Sales tax laws are notoriously complex: Product taxability rules vary from state to state; sales tax rates, rules, and regulations are subject to change; and there are currently more than 12,000 tax jurisdictions in the United States. At the time Quill was decided, there were few efforts to tame that complexity and businesses had to manage sales tax manually.

The Supreme Court issued the Quill decision three years before Amazon sold its first book online. If states were interested in taxing remote sales prior to the birth of the internet — and most were — the emergence of ecommerce made them redouble their efforts. However, states also recognized that they were unlikely to be granted the authority to tax remote sales without addressing the burdensome nature of sales tax compliance, especially for remote sellers.

Enter the Streamlined Sales and Use Tax Agreement.

Streamlining sales tax compliance

In the fall of 1999, the National Governor’s Association and the National Conference of State Legislatures decided to try to simplify sales tax collection and create a more business-friendly sales tax system. The Streamlined Sales and Use Tax Agreement (SSUTA) is the result of their work.

The SSUTA strives to simplify sales and use tax administration for all sellers through the following:

  • State-level administration of sales and use tax collections
  • Uniformity in the state and local tax bases
  • Uniformity of major tax base definitions
  • Central, electronic registration system for all member states
  • Simplification of state and local tax rates
  • Uniform sourcing rules for all taxable transactions
  • Simplified administration of exemptions
  • Simplified tax returns
  • Simplification of tax remittances
  • Protection of consumer privacy

There are currently 23 full SST member states and one associate member state. Member states remain autonomous taxing authorities — they still decide what to tax and what to exempt; however, they also adhere to certain conforming provisions. For example, while all SST member states use the same definitions for clothing and food, each state determines whether clothing and food are exempt or taxable.

Though most SST member states joined in 2005, and the last to become a full member was Ohio in 2014, SST is perhaps more relevant now than ever because of its role in South Dakota v. Wayfair, Inc.

Like Bellas Hess and Quill, the Wayfair case grew out of a state’s attempt to tax remote sales. Under South Dakota’s economic nexus law, a remote seller triggers an obligation to collect and remit sales tax in South Dakota when it has more than $100,000 of gross sales or at least 200 transactions in the state in the current or previous calendar year.

The Supreme Court ruled in favor of South Dakota and repealed the physical presence requirement, but it didn’t establish a similar bright-line test. It did highlight several aspects of South Dakota’s tax system “that appear designed to prevent discrimination against or undue burdens upon interstate commerce.” These are:

  • The economic nexus law provides a safe harbor for those with limited business in South Dakota
  • The economic nexus law prohibits retroactive enforcement
  • South Dakota has adopted the Streamlined Sales and Use Tax Agreement

Since South Dakota won the right to enforce economic nexus, more than 30 states have adopted a similar provision to increase remote sales tax collections. Like South Dakota, the states allow an exception for small sellers, and most are enforcing economic nexus on a prospective basis only.

Many economic nexus states are also SST members, though approximately 10 are not. Whether that puts them at risk for litigation remains to be seen: The Supreme Court did not mandate participation in the SSUTA in South Dakota v. Wayfair, Inc., but it clearly found South Dakota’s membership a significant deciding factor. According to Joseph Bishop-Henchman of the Tax Foundation, states that require remote internet sellers to collect sales tax but fail to simplify their sales tax systems will be “under a cloud of legal uncertainty.”

How SST benefits businesses

Businesses can register to collect and remit sales tax in all member states through the Streamlined Sales Tax Registration System (SSTRS), which can significantly cut down on work and hours spent.

There are financial benefits to registering through the SST as well. Member states currently subsidize or fully cover the cost of outsourcing sales tax administration to an SST Certified Service Provider (CSP) like Avalara for voluntary sellers: There’s no cost for voluntary sellers collecting only in SST states, and reduced costs for voluntary sellers collecting in both SST and non-SST states. The CSP works with a seller’s accounting system to identify the taxability of products and services, apply the appropriate rate, and maintain a record of the transaction. Businesses that use a CSP are protected from audit liability.

As an SST CSP, Avalara can help set you up for an affordable sales tax compliance solution. Learn more.


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.
Avalara Author
Gail Cole
Avalara Author Gail Cole
Gail Cole began researching and writing about sales tax for Avalara 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.