Why the number of sales tax jurisdictions doesn’t matter

Illustration by Cory Thoman - http://clipartof.com/1087428

So what does all that mean?

First, let’s be clear: It would never mean a sales tax return or an audit for each jurisdiction. The Marketplace Fairness Act says that there has to be just one central authority in each state that handles sales tax returns and audits. So no matter how many tax jurisdictions are in a state, there’s just one return to file, and if a retailer is audited, there’s just one audit from the state. And retailers who use state-certified sales tax management services don’t need to worry about audits in general—but more on that in a moment.

So what about sales tax rates, which can vary by jurisdiction?

The good news there is that the Marketplace Fairness Act requires states to provide sales tax management software or services (such as TaxCloud) for free. These programs check and update rates and product definitions for every tax jurisdiction, and it all happens behind the scenes, so sellers don’t need to worry it.

In the end, for online sellers, collecting sales tax is much like handling shipping. There’s a program or service to set up with the online store, and then the program handles everything—no matter how many tax jurisdictions there are.

Back to audits: When retailers use sales tax management programs from state-approved Certified Service Providers (CSPs), they never have to host an audit. The CSP deals with the state instead, so the retailer doesn’t need to worry about dealing with state officials and coming up with transaction records.

Rates, audits, returns, the number of tax jurisdictions—with sales tax management services, retailers don’t need to worry about any of them. It’s all taken care of.

3 Responses to Why the number of sales tax jurisdictions doesn’t matter

  1. Anonymous says:

    Whomever wrote this puff piece must have been born yesterday. And, definitely has never dealt with filing a sales tax return or state and/or local department of revenue. As my learned father-in-law used to say, “take the needle out of your arm”. If anyone out there believes this, then I have a bridge in Brooklyn that I would like to sell you. How long has the SSTP been in existence? Are all the jurisdictions that impose sales and/or use taxes members? Free software? CSP handles audits? So, if there is an error in the rate or the treatment of an item will the CSP pay the deficiency? No matter how diligent and competent the CSP is in its work, there will always be assessments.

    • FedTax says:

      Thank you for your comment. We appreciate that you are skeptical, but we can assure you, our TaxCloud service already does everything we say it does – and yes, we have filed quite a few sales tax returns. 😉

      Regarding your questions:

      Q: How long has the SSTP been in existence?
      A: The project began in 1999/2000 and became fully functional in 2005.

      Q: Are all the jurisdictions that impose sales and/or use taxes members?
      A: No. 44 states have been participating since inception, 22 states have fully implemented the technical and legislative requirements. Under the Marketplace Fairness Act, states can choose whether they want to adopt SSUTA or implement the minimum simplifications in the bill.

      Q: Free software?
      A: Yes – TaxCloud totally free for retailers (no asterisks, no hidden fees, no fees of any kind). We can offer TaxCloud at no cost to retailers because we are paid by the states to minimize (or even eliminate) any financial or technical burdens related to sales tax collection and compliance.

      Q: CSP handles audits?
      A: Yes.

      Q: So, if there is an error in the rate or the treatment of an item will the CSP pay the deficiency?
      A: TaxCloud is indemnified by the states, and we only use states-provided data. So long as sellers accurately categorize their item(s), TaxCloud will defend sellers from any assessments, penalties, or interest.

      Q: No matter how diligent and competent the CSP is in its work, there will always be assessments.
      A: OK – Proudly, we haven’t had any yet.

      • Jerry says:

        The *real* problem is categorization. Categorize this properly in every jurisdiction:

        Sales of Ice Cream Cakes and Similar Items

        And yes, Ice Cream Cakes are unlikely to be ordered and shipped interstate, but Kansas City, MO to Kansas City, KS is possible.

        The point is that every jurisdiction may have slightly different rules and end up with different tax categories for the same item. A small business that may be lucky enough to have a tax “person” is hosed by this far more than a larger business with a tax department.

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