TaxCloud Interview: What Is a Streamlined Sales Tax Certified Service Provider?

Do you ever wish someone out there could figure out the tough sales tax stuff for you? If your business works with a Streamlined Sales Tax Certified Service Provider (CSP), there is. We talked to Tim Bennett, Director of Sales and Use Tax at the Kentucky Department of Revenue, to get the scoop on what CSPs do and why you’d want to work with one.

What Is a Streamlined Sales Tax Certified Service Provider?

A Streamlined Sales Tax Certified Service Provider is a company certified by the Streamlined Sales and Use Tax Agreement. A CSP can perform all the sales and use tax functions for a seller, except taking on the seller’s obligation to pay tax on its own purchases. Thanks to a CSP, a company can outsource the majority of its sales tax admin responsibilities.  

Tim has been a member of Kentucky’s Certification Committee. Every state that’s a member of the Streamlined Sales Tax Governing Board has a representative on the certification committee who plays a role in the CSP certification process. Certification committee members are part of the process from when a company applies for the final approval of the CSP’s contract. 

To become a CSP, a company needs “to prove that they can provide full CSP services and that they can do so accurately,” Tim says. 
According to Tim, aspiring CSPs must have appropriate internal controls, financial capabilities, and security processes. They also need to be able to transmit Simplified Electronic Returns (SERS) through their web service.

Certification isn’t a one-and-done process, Tim notes. He and other members of the Certification Committee keep tabs on CSPs to ensure they continue to provide the appropriate services to their clients. 

What Services Does a Streamlined Sales Tax Certified Service Provider Offer?

The services a CSP provides include:


  • Identifying taxable products and services
  • Determining the correct tax rate
  • Maintaining transaction records
  • Setting up and integrating its software with the seller’s
  • Preparing and filing tax returns
  • Paying sales tax to SST member states
  • Resolving audits from SST member states
  • Protecting seller’s privacy


If one or more SST state audits a business, “the CSP essentially serves in place of the taxpayer in dealing with the state(s) in those instances,” Tim says. Businesses can “also enlist the CSP to assist in the SST registration process,” but that decision is at the company’s discretion.

How Does One Continue to Be a Streamlined Sales Tax Certified Service Provider?

Certification is ongoing, Tim points out. At the end of every contract, the certification committee reviews the CSP and votes to recommend recertification (or not). 

Test Decks are a critical part of the process of certification and recertification. 

“The test deck uses the items on the taxability matrix to test whether the CSP candidate has the correct taxability for all these items,” Tim says.  “States also use the test deck to make sure the CSP candidate is correctly using the SST rates and boundary databases to return accurate sourcing results based on the addresses provided in the test deck. 

“To get approved, a CSP applicant must return the test deck with 100% accuracy.  Once a CSP has a contract with the SST Governing Board, they must run the test decks every quarter to assure they are still returning an accurate result.”

What Are the Benefits of Being a Streamlined Sales Tax Certified Service Provider?

Tim notes that there are benefits of certification for taxpayers, CSPs, and states. Since states compensate CSPs, businesses have reduced costs. They also have peace of mind that they are getting reliable sales tax results and that the CSP will be there to handle any audit concerns that come up. 

“Without CSPs, businesses would have to navigate registration, calculating tax, filing returns, and remitting the sales tax with the possibility that they may not do things correctly,” Tim says. They’d also have to deal with 24 separate states instead of a single CSP. 

States see similar benefits of working with CSPs, according to Tim. Thanks to CSPs, taxpayers who might have been hesitant to register and pay taxes do so. 

Finally, getting certified gives CSPs a seal of approval, which makes the provider more attractive to potential customers. 

Don’t leave your company’s sales tax up to chance. Work with TaxCloud, a CSP, and know we have your back. Sign up for an account with us today.

Vikki Smith: Innovation and Education Champion


Vikki Smith recently retired from the Washington State Department of Revenue. She has worked her entire career at Revenue and served in a variety of leadership positions including Assistant Director for Taxpayer Services, Chief Information Officer and Deputy Director.

In 2015, Vikki was appointed by the Governor and confirmed by the Washington State Senate to serve as the Director of the agency. As Director, Vikki oversaw the agency’s transition from 40 disparate legacy systems to a single tax and licensing system; championed the “voice of the customer” approach to customer service; and continues to advocate for effective stakeholder and government to government relationships through the creation of the agency’s Business Advisory Council, the Tribal Tax Advisory Group and the annual Washington State Tax Conference.

Russ:  Vikki, we worked together for so many years it is a distinct pleasure for me to be able to talk with you today about your amazing career and the insights you’ve gained from and about taxpayers, and about how to be an effective and innovative tax administrator.

Let’s start with your career. It’s not just anyone who can start as a temporary clerk and rise to agency Director. You also received the Harley Duncan Award for Leadership and Service in 2012. That’s the greatest accolade a tax administrator can receive.  What is it about the Department of Revenue that made for you a 50 year career?

Vikki:  I certainly didn’t think when I started as a temporary clerk that I would retire after 51 years in tax administration.  It was because I had the opportunity to work with such amazing and dedicated employees and leaders. In addition, I got the opportunity to promote, take on more complex assignments and implement some crazy ideas.   As we all know, our tax laws are not only complex but constantly changing. Each day brought a new challenge, so I never felt bored.

I also think I had a calling to serve the public.  I took pride in the agency and the fact that the revenue that was collected helped fund critical services for Washingtonians.

Russ:  I want to focus on taxpayer education for a moment.  You will recall we worked with Speaker Ballard on a study of Taxpayer Rights and Responsibilities. He and Revenue Chair Wang became convinced additional budget for the Department should be provided so that we could educate taxpayers about their rights and obligations.  They wanted us to provide materials in plain language that would assist taxpayers in their voluntary compliance.  You led the first agency division that championed that effort.  When you look back on it, what did you, and the agency learn from that experience?

Vikki:  I do remember the study and the day that I was asked to become the agency’s first Taxpayer Rights Advocate. My division, Taxpayer Services, was asked to look for ways to implement the recommendations.   I created a team and they were dedicated to the Plain Talk effort reviewing all the special notices and form letters. The goal quite simply was to make them easier to read and understand.

I am proud that the agency still believes in the principles and has been recognized nationally. The agency has provided training to other state revenue organizations over the years. Plain talk is so easy to implement, and it confirmed my belief that taxpayers want to report and pay correctly. Businesses, especially small business owners, should spend time running their companies, not trying to read and reread something and then end up calling the agency.

Russ:  In what ways did the study and education efforts that came out of it change the culture of the Department of Revenue?

Vikki: Every function we perform at the department is critical and necessary to achieving performance goals, meeting our revenue commitment and statutory requirements.  When I think about the study and how we embarked on outreach and education I believe it resulted in a better balance.  It changed our understanding about how cost-effective outreach and education can be and how it benefits our customers. Audit and collection activities are needed but I have always believed we educate first to provide an opportunity for taxpayers to voluntarily comply. 

Russ: You have a strong technical background, having worked in leadership positions related to Information Services. In your mind, what are the most useful ways for a revenue agency to embrace technology.  And what are some of the pitfalls to avoid?

Vikki: Leveraging technology is essential to providing robust online experiences for staff and the customers.  Technology helps meet increasing workloads while dealing with limited resources. Taxpayers want and demand secure online services.

I served as a member of Washington’s Technical Services Board and was the acting CIO and director of the central IT department for six months. Combined with my experience as the agency’s CIO I was able to develop a strong technical background. This allowed me insight into not only how to embrace technology successfully but also how to recognize the pitfalls.

In terms of pitfalls, I have seen major projects in other agencies fail due to not having an effective project manager.  If you don’t have the in-house expertise, it is important to hire an outside consultant. This is a deal breaker if you don’t have someone with experience and may result in the project failing.

The other thing I have witnessed is not having an executive sponsor.  When you are spending millions of dollars it is critical that someone is monitoring the success of the project at the executive level. That individual should manage and watch for scope creep, make sure milestones are met and the project stays within the appropriated funding.

The other factor I witnessed is never underestimate the need for organization change management. It is critical to project success and should be included in the budget request. You don’t want to build a system no one wants to use and constantly complains about.

Finally, is the need to address fraud mitigation and the bad actors constantly trying to hack the systems. You don’t want to find yourself in the newspaper and having to explain to your customers what happened.  I was lucky and we never found the agency in this position.  Last thought on this question is to find yourself a top-notch IT security individual.

Russ:  You were often selected to lead team projects. What are some of the projects you led you are proudest of?

Vikki:  When I think about this question, I recall many different projects in which I have been involved in over my career. These range from implementing major technology solutions, to creating a targeted education program, establishing a business council and most recently a tribal tax advisory council comprised of DOR staff and tribes located in Washington.

Russ:  The projects you led and participated in often involved significant changes in how the agency operated.  In all large organizations change is often met with resistance or indifference.  You were always able to overcome that and create a culture in which line employees not only accepted change, but often championed it.  What kinds of strategies did you use? How did employees come to realize the benefits of active participation in making change?

Vikki:  The department has always embraced the idea of continuous improvement. To be able to work in this type of environment has been wonderful. Maybe it was dumb luck, but I seemed to always have phenomenal team members that worked with me championing new ideas. They were smarter than I, had diverse opinions and backgrounds.  In many cases, they became ambassadors and helped communicate the importance of the change.

One other strategy I used was to try to understand why some may have a problem or question the need for change.  It is important to talk with them to understand their point of view. Take that information and see if it has merit and make changes if necessary.

Russ:  What are the most important things you have learned from the Revenue Family at DOR, business leaders, other agency heads, and ordinary taxpayers?

Vikki:  I would also add other tax commissioners/directors across the nation to your list. I am a firm believer that you should never think you know all the answers. Each of those you have listed have been valuable resources for me over the years.  I have found they willingly share information when asked.  Better decisions and a path forward come from listening and learning from others.

Russ: If you could make any changes to substantially improve the efficiency and effectiveness of the sales tax system, both in Washington, and nationwide, what would you choose?

Vikki:  Continued efforts in uniformity.  As with most states, sales tax is one thing we  have zero authority to  settle. So having a system that is uniform and easy to administer goes a long way in helping taxpayers report and pay correctly.

In Washington, I would love to have a single rate across the state but that is a proverbial pipe dream.

Russ:  What do you think taxpayers, both individually and collectively, could or should do to improve the sales tax system and make compliance easier for themselves, their customers, and the public servants with whom they deal?

Vikki: Promoting voluntary compliance through outreach and education is critical. It starts with looking for ways to actively engage taxpayers and tax professionals. Taxpayers can help the agency by explaining the difficulties they experience when reporting and paying their taxes. This isn’t just with implementation of new legislation but also existing laws. Taxpayer feedback helps the agency provide information that is clear, timely and easy to understand.  I believe it directly benefits the taxpayers by helping them avoid the risk of compounding costly errors.

Russ:   I know of lots of difficult challenges you faced – technical, managerial, cultural – as an agency manager and leader.  I can recall you saying “Oh, Lord!” on occasion.  But there was usually a lilt to your voice when you said it.  Your “Oh Lord!” seemed to encapsulate both a recognition of the size, complexity, and difficulty of a challenge, as well as an eagerness to take it on.  That’s really more of a comment than a question.  But I would invite you to comment if you like.

Vikki:  I was always eager to take on new assignments, but I was also cognizant of the potential to fail.  So, my comment was more along the line of thinking I am really going to need help. At the back of my mind I was also wondering how many more priority projects we really could take on without risk of failure.

Russ:  It would be malpractice on my part, given your extraordinary career, not to ask you to advise those starting out what you think are the key things to make the most of every job.

Vikki:  In looking back, I was lucky to have others that I would consider a mentor.  When you start a new job look to see who you respect and learn from them.  Ask for advice.  Don’t be afraid to take on new opportunities. Develop work relationships internally and externally.  Be approachable and kind. Pay it forward.  Work hard but have fun.

Roger Geiger: An Independent Business Perspective


Roger R. Geiger is a vice president/Ohio executive director for NFIB, managing the public policy, political, member activism and communication programs throughout the state. He also represents NFIB with national policy organizations. Mr. Geiger first joined NFIB in 1989 and has held a variety of leadership positions during his tenure. In recognition of his efforts to build the influence and clout of NFIB in Ohio, he has been consistently ranked in Smart Business Magazine’s “Power 100 Most Influential Leaders” in Columbus. He is regularly quoted in the media on issues of importance to small businesses. NFIB is a national association with chapters in all 50 states, and more than 25,000 members in Ohio the largest state chapter in the organization.

Prior to being named vice president, Mr. Geiger served as the NFIB/Ohio State Director from 1989 2003. Mr. Geiger has been appointed, by four Governors, to several state boards and commissions. The most recent appointments have been to the Ohio Commission to Reform Medicaid, the Ohio Sunset Review Committee (a review of all state boards and commissions), and the Ohio Bureau of Workers’ Compensation Nominating Council. He has often testified before committees of the Ohio legislature and the U.S. Congress, and before regulatory agencies.

Before joining NFIB, Mr. Geiger served as Manager of Governmental Affairs for Browning- Ferris Industries of Ohio. He also served as a Legislative Assistant in the Ohio House of Representatives for almost five years. Mr. Geiger is a native of Marion, Ohio. He completed his undergraduate studies at Xavier University in Cincinnati and holds a bachelor’s degree in Political Science and History, and has a mastersdegree, in Business Administration, from The Ohio State University.

Roger, thanks for joining us today.  Your work with the National Federation of Independent Business (NFIB) gives you a unique and important perspective among the guests we have had.

Russ: I think a lot of people think of mom and pop storefronts when they think of small businesses. While government and private organizations have broader definitions they also have differing standards or definitions for what constitutes a small business that suit their organizational purpose, governing statutes, mission, and other factors.  How does NFIB define a small business?

Roger: For the purpose of NFIB membership you must be independently held and for profit – those are the only two criteria for membership.  NFIB’s membership cuts the small business community’s demographics by size, type and location.  A typical NFIB member is a private business enterprise that employees 25 or fewer people and has $1.5 million or less in gross revenue sales.  We represent what typically looks like “main street” USA.

There are no standard definitions of a small business but the most common definition that is used is the SBA’s definition it uses for its loan programs – 100 or few employees unless in manufacturing then it is 500 or few fewer employees.

Some interesting stats on small businesses:

90% of all business’ employ100 or fewer and 8 out of 10 employ 25 or fewer
There are more than 30 million self-employed Americans – the smallest of small businesses
70% of all Americans got their first paycheck from a small business owner
Almost 50% of all non-government jobs are provided by small businesses
The fastest growing segment of the business community in America are businesses owned by women and minorities
75% of all small business owners operate their business within 50 miles of where they grew up
The average start-up cost for a small business is about $10,000 (usually financed by personal credit cards) 

Russ: What would you like our readers to know and understand about the history of NFIB?

Roger: NFIB is a 501 (C) 6 professional business organization that was founded by a group of California entrepreneurs, in 1943, who felt that big business, big labor and big government needed to make room at the public policy debate tables for small businesses.  Today NFIB is the nation’s largest advocacy organization exclusively representing independent business owners,with more than 300,000 members nationwide and chapters in all 50 states.  The primary mission of the organization is to be “the voice of small business” in Washington, DC and all fifty state capitols.

Russ: What distinguishes NFIB from other small business organizations.  What issues do you concentrate on and what services do you provide your members?

Roger: Three unique features of NFIB that separate us from most other business groups:

1) We are made up exclusively of independent for profit business enterprises
2) Our members get to set their annual dues between a minimum and a maximum amount, with dues capped, so no one company has controlling financial influence
3) Each member is entitled to one vote to set organizational public policy positions.  Every issue NFIB engages in, at the state or federal level, has been set by a survey of its members

The issues can vary at the federal and state levels, but generally NFIB engages in public policy debates on issues that effect a diverse range of businesses.  These issues include such things as workforce development/education, the legal environment, employment and labor issues, taxes and fees, access to quality and affordable health care, state and federal business regulations, workers’ compensation, unemployment compensation, environmental regulations, reliable and affordable energy, etc.

While influencing federal and state public policy on behalf of small business owners is our primary mission, NFIB, through its member services corporation, does provide the collective buying power of our membership to provide discounts for a limited number benefits such as insurance products, credit card processing, labor posters, computer needs and shipping.  In addition, through NFIB’s research and educational entity, we provide members with “how to” and compliance information, seminars and webinars.  Through NFIB’s Legal Center, we provide limited legal consulting services and represent the small business community’s interests in the state and federal count systems.  

Russ: I had the privilege of working with you as a representative for Washington State when the Streamlined Sales Tax Governing Board was developing policies in some key areas.  My recollection is that NFIB did not have a position on collection authority, but that you nonetheless were deeply engaged in questions such as the cost of collections and definitions.  What prompted your strong participation?

Roger:  You are correct, NFIB does not have a policy position on Streamline Sales Tax collection.  When NFIB has surveyed our membership on this issue several times in the past, we have consistently received a mixed response.  For NFIB’s “bricks and mortar” small retailers this is usually an impactful issue, for the rest of NFIB membership its perceived as a non-issue or and increased tax issue.  However, many of the secondary issues, within the streamline sales tax collection, have been of concern to NFIB and its members, especially small retailers. The big ones have been origin vs. destination tax collection, product definitions, small seller exemptions, and the cost and complexity of sales tax collections amongst the thousands of sales taxjurisdictions across the country for both small retail collectors and for small business consumers.

Russ:You continue to be involved with the Business Advisory Council to the Governing Board. Much of the early effort of SST was aimed at simplifying sales tax collection and compliance.  What do you think were the most important things accomplished in that regard?  


Standardization of taxable definitions – which also continues to be a challenge
A small seller exemption which is lower than what we requested but there is at least one
The development of competitive and robust CSPs
The indirect “safe harbors” for small sellers who work through streamline and its infrastructure
The slowing effect, on the part of participating states, to dramatically expand sales tax collections

Russ: What got left on the cutting room floor you now wish had gotten done?


A broader definition of a small seller exemption
NFIB supported origin-based sourcing but recognize that genie is long out of the bottle

Russ: From NFIB’s perspective what are the most significant obstacles for small business success today and what should states be doing to address them?


A skilled workforce is the #1 issue facing small business owner across the country
Still recovering from the shutdowns and economic slowdowns of the pandemic, the current challenges with inflation (the cost of doing business) and supply chain issues could not be happening at a worse time for small businesses
Small businesses need predicable regulatory, tax and legal climates to thrive 

Russ: In the years you have been working on tax and other policy issues important to small businesses the business world has undergone some dramatic changes and innovations.  How have the challenges and needs of small businesses changed as a result?  

Roger: The answer is the dramatic changes in innovation, mostly in the world of technology, has been a double edged sword.  A lot of new innovations start in small firms and history has shown most innovations have come from entrepreneurs.   Who would have thought 5 or 10 years ago we would have such a robust gig economy dominated by individuals who work for themselves.  Innovations often bring new opportunities and great efficiencies to small companies but often they are costly to secure and, in some cases, impractical to implement.  Small businesses have been shown to generally be about five years behind the technology curve, which makes it difficult to standardize business processes and procedures across the business world.

Russ: And what new tools do they have to power their success?

Roger: I have often said, “if you have a cell phone, a laptop, and access to good internet at your favorite coffee shop, you can be involved in almost any business enterprise up to and including international trade!”  The most common response I get from any small business owner over the age of 40 as to what has been the biggest change they have witnessed in their business over the years … the answer almost every time is the use of technology – it doesn’t matter what type of business.  

Russ: If you could give just one piece of advice to legislators and administrators regarding how they shape tax policy and administration what would it be?

Roger: The biggest challenges for both public policy makers and regulators to understand is that a “one size fits all” approach never works for the small business community.  What you can ask the Fortune 500 companies to do and what is even in the realm of possibilities for small businesses to do is often dramatically different and usually gets lost in the debates.  Coupled with that is the lack of understanding of the tremendous amount of education and “ramp-up” time that is need for the small business community.  It is often underestimated and overlooked.

Russ: If you could give just one piece of advice to small businesses that are trying to navigate and comply with complex state and local tax and regulatory regimes, what would it be?

Roger: Don’t try and figure it all out on your own.  The advice I give to anyone starting or taking over a small business is to make sure you have a good team that includes an accountant, a lawyer, an insurance agent and a banker.  Don’t be afraid to admit that it is impossible to know all the rules and regulations you need to operate under, so seek good advice from multiple sources.  Most mistakes made by entrepreneurs early in their endeavors has to do with not getting good advice or getting no advice at all.  Just like most things in life, you are only as good as the people you surround yourself that you can count on for help.

To learn more about the National Federation of Independent Business visit

Harley Duncan: The Values and Value of Engagement


Mr. Duncan is a consultant to KPMG’s State and Local Tax practice. His primary responsibilities include improving relationships with state taxing authorities, assisting clients in working with state tax agencies, and dealing with complex indirect tax issues.

Mr. Duncan joined KPMG in 2008 and served as leader of the Washington National Tax State and Local Tax Group through 2021. Mr. Duncan spent the previous 20 years as Executive Director of the Federation of Tax Administrators, the association representing the principal state revenue collection agencies in each of the 50 states, D.C., and New York City.  He also served five years as Secretary of the Kansas Department of Revenue.  Prior to that, he was the Assistant Director of the Kansas Division of the Budget.  He has held positions with South Dakota state government, the Advisory Commission on Intergovernmental Relations and the National Governors’ Association.  Mr. Duncan received New York University’s Outstanding Achievement in State and Local Taxation Award in December 2006 and was awarded the IRS Commissioner’s Award in June 2008.  In 2018 he received the Franklin C Latcham Award for Distinguished Service in State and Local Tax from Bloomberg Tax. He was named as Person of the Year in 2021 by State Tax Notes.

Mr. Duncan is the author and co-author of numerous articles and papers on state and local taxation and public budgeting. He has published several articles on VAT and the coordination of a VAT with state and local sales taxes as well as the taxation of various technology services. He is a frequent speaker at state and local tax conferences and meetings. 

He is a graduate of the University of Texas at Austin and South Dakota State University.

RussHarley, we are honored to have you join us today. When I look at the contours of your career, and your achievements across a wide variety of policy and tax administration issues, I see a strong common element and philosophy, the constant urging of engagement, including when it is uncomfortable or unfamiliar territory. Engagement seems to be a natural mode of operation for you. 

Let’s start with federal legislation. Your work on the Mobile Telecommunications Sourcing Act and the Internet Tax Freedom Act are cited by both private sector and public sector experts as pivotal in achieving workable compromises on complex, difficult issues in the only venue with jurisdiction to solve them. Getting Congress to actually develop and enact workable solutions on state issues is extremely rare. What was your strategy of engagement going in?

Harley: The strategy was driven by the fact that these were both issues in which there was an industry group driving it with important members of Congress willing to support them. The question for states was then whether there were related issues they wanted to address (e.g., remote sales) that would call for engagement. Once the states (through NGA and NCSL) determined it was important to engage, the FTA and my strategy became clear. It had two parts. The first was to facilitate and participate in a constant flow of communication with the states for their input and with the industry to ensure they remained focused on their stated issue so any resolution would not have detrimental collateral impacts. The second part of the strategy was for FTA and tax administrators to play the role of honest information broker with Congress to ensure they understood the nature of how states actually dealt with the issues involved and the impact of proposals on states. There are few members of Congress or their staff with significant background in state taxation, and the role was to put the immediate issue in the context of state taxation overall to help them understand why the states were taking the positions they were and what the impact was.

RussI recall clearly how your mentoring made me a stronger partner and advocate with my state’s Congressional delegation when the above issues were moving forward. I think this was instrumental in making sure our state’s interests were protected while Congress worked on its broader legislative goals. I know you did the same for many other state administrators, and that we are all grateful for the lessons learned.

Harley:  Well, thank you for that, Russ. As I get farther along in my career, I realize that helping people develop is one of the most important things we should all have in our job responsibilities. I saw the role of a state representative as, in significant part, being that honest information broker to explain the impact of the matter on your state so that the Member can appreciate the position you are articulating. If an issue and its impact can be made concrete and understandable, it’s easier to appreciate and deal with. The second lesson is that there is no voice more important than one from the home state. You will be able to provide the appropriate local context and will be able to convey what is important for the Member to understand, much better than a hired representative. It is also important that they understand you are speaking on behalf of the Governor (or other policymaker) on the issue. That also imposes a special obligation to be prepared and to be forthright because if you are not, they’ll remember it, and it will reflect poorly on you and those whom you represent.

Russ:  At the same time business engagement with the states was essential to find compromises that would work. How did you manage that piece?

Harley:  There are a few key elements, I think. First, identify the constructive leaders among those with whom you are negotiating – those that who are motivated by reaching a resolution rather than espousing a position. (We know them as Deborah and Meredith.) Second, maintain constant communication, and third, keep the conversation focused on the agreed-upon target. Don’t chase extraneous issues as it tends to lead you down a rabbit hole and breeds suspicion about the real goal.

Russ: I have heard some tax administrators say states should not engage with Congress on tax issues pertaining to the states, but should simply assert state sovereignty. Is there anything wrong with this approach? Engagement takes a commitment of time and energy, and with no guarantee of a comfortable, or even acceptable result. Do you think this discourages some from getting their feet wet?

Harley:  That is an understandable response, and sometimes it is the right response. To pull it off, you need to be able to show the other side’s position is largely without merit (not necessarily easy when you represent 50 different states). If there is some merit, it puts the obligation on you, the states, to try to resolve the issue among yourselves. The Streamlined Project is the premiere example of states working together to do that, but it also shows how hard it can be. I also think straight-out resistance can freeze things in place and consume resources merely fighting brush fires to stay where you are.

Russ:  When you were appointed to head the Kansas Revenue Department the agency’s relationships with the business community were at a low point. How did you decide on an engagement strategy and goals? What were those processes like, and how long did it take to develop significant trust relationships with members of the business community?

Harley:  There is probably a whole case study on what to do and what not to do there. The concern of the business community, not entirely unfounded, was that the Department was less than transparent, efficient, or consistent. We worked, with the backing of the Governor, to develop and deploy an approach to clear a large case backlog and better target audit policies. We reached out to certain industries (oil and gas, telecom and manufacturing) where we had, shall we say, challenges and listened and learned from them. After a couple of years of fairly diligent work, we built some trust and got closer to where we needed to be. At the same time, we had to implement three significant legislative actions that had serious administrative issues for both businesses and the Department. Working with the state CPA Society, certain industries and the local TEI chapter, we jointly developed approaches that could be reasonably administered. That helped a ton in building relationships and trust.

RussOnce those initial steps of engagement proved productive how were you able to build on them?

Harley:  We took some steps to institutionalize the relationship building and information sharing. We had an advisory committee for the Department, and we had regular consultation sessions with TEI, the CPAs and the state chamber. In addition, as we pursued legislation, we always tried to make sure that affected taxpayer groups were aware of what we were planning and that we wanted their input. It only took once of getting a bill quashed without so much as a hearing to realize that if you are going to try to run a bill on trucking, you better talk to Mary at the state trucking association first.

RussDid your Kansas experience help shape how you advised state administrators in your role at FTA?

Harley:  Well, it did, but remember that many administrators involved with FTA at that time had a lot more experience than I did. So, I learned more than I gave. But, I think there were two things I was able to bring to the table. First, it is very difficult to design a tax administration process for a business if you don’t know how the business operates or how the process is handled in the business. So, if you learn from the businesses and work with them, you are likely to get better compliance. Second, while each state can certainly do things its own way, to the extent we can do things in a similar way, the better compliance is going to be.

RussState tax administrators are probably most familiar with FTA’s cooperative relationship with the IRS regarding income tax issues and administration.  What other tax areas has FTA been involved in that have been of practical benefit to state administrators and businesses?

Harley:  There were two major efforts to promote uniformity in certain tax administration areas that fly a bit under the radar, but I think have had a long-lasting impact on states and businesses. In the mid-1990s, led by Stan Arnold of New Hampshire, FTA organized the electronic business process working group that analyzed and recommended some uniform approaches to areas such as EFT transmissions, evaluated receipts settlement, procurement cards and recordkeeping. With education and help from the business community, all the reports gained traction and are still in use in many areas today. Similarly, FTA has really been a leader in working with businesses and states to develop standards for various electronic payment, filing and information reporting transactions. This is really “in the weeds,” but is valuable to both states and business. I always called it God’s work. Finally, we were pretty intimately involved in every effort to deal with the remote sales issue from the 1990s forward.

RussFTA annual awards provide recognition to the states by their peers for outstanding efforts and innovative solutions in tax administration. How have those awards evolved, and what purposes besides recognition were behind them? It would be remiss of me here if I did not note that the highest award given is the Harley Duncan Leadership Award. 

Harley:  I think the progression has been that at first, people would see the application announcement and say, “Oh, we should submit this project we just finished. It’s pretty cool.” Now, I think there is more of a mindset that says, “We are doing something that every agency has to contend with. If we do it right, we can share it with everyone and get some recognition in the process. It really is about getting people to think about sharing experiences and providing them a platform to do so. Thanks for the shout out on the Leadership Award. I am proud of that. Regardless of the name, I think that is an important award. There are many people who spend their careers in state tax administration that do creative and important work that often goes unrecognized except for maybe their families and pets. Two that come to mind are your fellow colleague Vicki Smith of Washington State and Diane Hardt of Wisconsin, both of whom are finishing off life-long careers in state tax administration.

RussDuring the years I was able to work with you what I most remember is the number of times you were able to give me informal practical problem solving advice (e.g. use this angle, consult this person or state, talk to this business association, or try this…., etc.).  The advice was often directed to get purchase, a point of entry, for starting to resolve an issue or get resources. And you would often make introductions as appropriate. Did you see that as a primary role?

Harley:  Absolutely! As I said, mentoring is really everyone’s responsibility. You have to work at it, but mainly it is just offering your time. FTA provided me an opportunity to gain an insight to tax administration across the country. With that national perspective, I think I was able to point people in a direction and help them short-circuit their learning curve and help them avoid some pitfalls.

Russ:  With your retirement, where could a young tax professional find such guidance? What other advice would you give someone beginning a career in state tax?

Harley:  Nearly every organization has people that can be good stewards and mentors.  Generally, those same people enjoy the responsibility and make themselves available to young people. Once you identify them, introduce yourself or arrange to be introduced. As to career advice, don’t be afraid to raise your hand to try a new area and make it a learning experience. Also, if a new area comes along, don’t be afraid to volunteer and learn about it. If it is really new (e.g., NFTs), you know as much about it as anyone.

Russ:  The ability, structurally and culturally, of state administrators to engage with elected officials and influence tax policy varies widely among the states. How can state administrators find ways to maximize that ability?

Harley:  That was something I learned when I moved to FTA. Like you in Washington State, in Kansas we had the role of tax policy advisor and advocate for the Governor. Some states, however, see the job as administration and not policy. Even there, however, there will be relationships with legislators. I think in both cases, the job of the administrator is the same – keep them apprised, consult with and learn from them, and provide your honest advice as appropriate. It is important, however, to always remember your role and their role. They are the elected official, not you.

Russ:  Making the extra effort to have true engagement with businesses during rule making and other administrative functions can seem like a lot of extra work to folks who already have plenty on their plates. What makes it effort and time well spent?

Harley: Well, it is like your mother probably told you, “If it is a job worth doing, it is worth doing well.” It is not a costless undertaking. But, if done well, it will likely lead to a better product and greater buy-in by all parties. The resources and time required needs to be understood by those who control the resources and the time.

RussState tax agencies are often not able to embrace technological change with the resources and in the timeframes the private sector can muster.  At the same time, technology developments can be drivers for taxability questions and administrative improvements. How can state tax departments work within these circumstances to better conduct their business and provide better service to taxpayers.

Harley:  Tax departments in business will also tell you they must struggle to get technology resources and enhancements. It seems to me that the scarcity of technology resources for tax administration goes both ways and needs to be recognized by businesses and administrators when actions on either part are required. That said, both sides are probably becoming more nimble over time. I do think efforts such as SST and CSPs provide important learning points. They show the value of working together and developing one system to serve multiple states. The CSPs are a prime example of cooperative business-government relationships to achieve a certain end and providing the proper incentives and infrastructure (i.e., rules, standards, etc.) to achieve a market solution to a challenge facing both government and business.

RussHow did your years of experience with Kansas and FTA prepare you for your role at KPMG?  How has it helped you in advising businesses?  And what new have you learned from working with business clients at that level?

Harley:  It gave me such an in-depth and broad understanding of tax administration, how administrators think and how agencies operate. That helps me in advising clients and trying to resolve sticking points by helping them see the agency’s position and needs. By the same token, it helps me work with agencies to understand the client’s position, needs and motivations. The combination helps you be a broker and bridge between the parties. Two things I have learned in working with businesses from the practitioner side. I am amazed how the accounting treatment of an issue and its effect on financial statements can affect how the client approaches it. Also, clients really are trying to get things right, but it is very often a question of knowing what the right answer is, how to get guidance from the tax agency, and having the information to do it properly.

Russ:  It seems like all of these kinds of engagement, both on the state side and the business side work to positively reinforce relationships and successful outcomes. What do you see as the career benefits of being engaged in the way you have advocated, whether in state service or as a business person?

Harley:  It is without a doubt the people I have gotten the chance to work with and the relationships I’ve formed, among state administrators, practitioners and business people. SALT (State and Local Tax) is such a small community we don’t even need a secret handshake. You can just say Wayfair and see if they give you a knowing look. I have been very lucky in that regard. Also, I have gotten to work on an incredibly broad range of issues in all sorts of contexts that has provided a real variety to my life.

Russ:  When you think about it, does this work philosophy carry similar benefits when carried over into private life?

Harley:  That is a really good question that causes me to pause a bit. I really think it comes down to so much of what is important in life requires good relationships with family, friends and people you meet and work with. That means to me that you need to treat everyone with respect, learn from every experience and be willing to help whenever you can.

RussI hesitate to end on a negative note, but there’s one very recent development I’d like to get your views on. You remain a keen observer and analyst of state and local tax trends. As such, I’m sure you’ll agree that not all questions can be worked out in a cooperative manner. Sometimes litigation is necessary and sometimes it is even helpful. I saw in a recent article for the State Tax Research Institute that you concluded, “Many states and localities are initiating actions to extend the additional collection authority authorized by Wayfair to locally administered sales and accommodations taxes, often without taking steps to make the local taxes more uniform or otherwise simplifying compliance in a meaningful way.” It appears that you were finalizing your article while Wayfair was drafting a complaint to challenge local home rule tax collection in Colorado. Does the new Wayfair litigation in Colorado suggest that the states and localities have misread the original Supreme Court Wayfair decision and are engaged in overreach?

Harley:  I don’t know that they have misread it as much as it seems they stopped reading after the economic nexus discussion and didn’t get to the “undue burden” discussion and those factors in South Dakota that the Court said would address any undue burden question. The concern is that in certain cases states with home rule sales taxes and accommodation taxes are not putting a meaningful economic nexus threshold or any meaningful simplifications in place. Without central collection, base uniformity, and (I would argue) rate simplification, I think they are inviting a challenge. I will be watching the Colorado litigation with more than a passing interest.

Streamlined Founder Diane Hart’s Extraordinary Career


Diane L. Hardt is Administrator of the Division of Income, Sales and Excise Taxes (IS&E) in the Wisconsin Department of Revenue.  Diane was appointed administrator in May 1993 by the Secretary of Revenue.

The IS&E Division is responsible for tax policy and administration of all income, franchise, sales/use and excise taxes, including processing, audit, customer service, collections, criminal investigations, and technical services.  The division has 812 permanent employees and 62 seasonal employees.

Prior to her appointment as administrator, Diane held positions as an auditor, audit supervisor, Director of the Tax Processing Bureau and Director of the Audit Bureau.  Diane has an undergraduate degree in accounting and a Masters of Business Administration degree, both from UW-Madison.  Diane is also a Certified Public Accountant.

Diane served as co-chair of the Streamlined Sales Tax Project for eight years.  She has also served in various officer positions, including President, of the Streamlined Sales Tax Governing Board.  Diane also received the FTA Harley T. Duncan Leadership Award in 2019.

Russ:   Diane, thank you for joining us to talk about your career and accomplishments, the lessons you’ve learned, and your thoughts on the future of tax administration.  I want to start with what I regard, and what I think nearly all government officials, regard, as a signal honor.

In 2003 Governing Magazine named you public official of the year, citing your work as co-chair of the Streamlined Sales Tax Project. Governing Magazine praised you for succeeding where many others had failed in getting states to agree to simplifications large and small.  You were cited for your vision, patience, and diplomacy, for keeping administrators focused on the big picture, for outreach and trust building with the business community, and for a cross country blitz making the case for the project to conferences and legislatures.  This was an enormous undertaking with high risk of failure. Why did you do it?

Diane:  First, I need to recognize my co-chair, Charles Collins.  Charles had retired from his position as leader of the Sales and Use Tax Division at the North Carolina Department of Revenue by the time I received the honor.  He should have been there with me as he worked so hard on the project.

Charles and I were passionate about our mission of leveling the playing field between remote sellers and brick-and-mortar stores.  We were also passionate about ensuring that businesses and governments worked together to get to the best solutions and practices.   We had past experiences in negotiating with the direct marketers and we really believed that this long-standing problem could be solved.

Russ:  You had already had a distinguished career at the Wisconsin Department of Revenue as your brief bio above illustrates. How did that prepare you for your Streamlined work?

Diane:  In my 45-year career at WDOR, I sponsored and led numerous projects, brought internal and external stakeholders together to solve problems, negotiated agreements, and learned a lot about getting the most out of the talented people we have.  Streamlined participants (government and businesses) had and have so many tax experts but also so many people who know what it takes to get to reasonable solutions and consensus as well as political acceptance.  It has worked well to combine businesses, tax administrators and policy makers.  

Russ:  What do you think were the major successes of the project?


States, local governments, and businesses working together toward one common goal.  I don’t think there was ever a project like this in the past or since that has achieved these kinds of results.
Uniform definitions that have had “staying power.”  Policy makers can see the advantages of having uniform definitions across states.
Uniform sourcing rules.  This was, of course, necessary when you are dealing with remote commerce.  It was not easy to get to uniformity though.
Addressing definitions and sourcing rules for digital products and services.  There may be adjustments in the future, but this was the first solid effort to address the digital world.

Russ:  Sometimes it is the small issues that are the most difficult.  You were a leader in the implementing states and went on to chair the Streamlined Sales Tax Governing Board.  What do you remember as the most difficult “minor” issues to resolve? And why are these smaller issues sometimes so difficult?

Diane:  It was what appeared to be small administrative issues such as a uniform method to round numbers or a uniform way to define a sales tax holiday.  When you have multiple states with multiple definitions and administrative procedures, and you have the business community that has its own interests, what seemed easy was not always easy.  Out of urgency of getting to agreement, we did do a lot of work and had numerous agreements in the first year of work.  As more people got involved, they had their own interests, so we had to go back and re-visit past work.  But we reached a final agreement in 2002 and that was a major milestone.

Russ:  In your article “The Five Elements of a Streamlined Sales Tax System, published well before the Supreme Court’s Wayfair decision, you emphasized the need for commitment.  “This is not just about government commitment, because some businesses have vested interests in some of the complexities of the current sales tax system, neither is this just about business commitment, because state and local governments have to change to meet the borderless economy.”  The five elements you named are:

1) Uniform Definitions
2) Uniform Sourcing Rules
3) Implementation of the new technologies
4) Continuing the dialogue between governments and businesses
5) Flexibility in creating and maintaining the streamlined sales tax system.

How would you grade governments and businesses on the initial implementation of these elements?

Diane:  I would give a grade of “B+” because we can always do better.  All of us recognize that it would be better if all sales tax states adopted the uniform definitions and sourcing rules and used the new technologies. Still, this was a long and difficult road, and it is a great success to have 24 states join together.  Governments and businesses have accomplished so much in the Streamlined Sales and Use Tax Agreement originally approved on November 12, 2002, and in the amendments approved since then.  

Russ:  With the Wayfair decision the sales tax world changed.  State and local governments got the collection authority they were seeking.  Major businesses got the “level playing field” they were seeking.  Do you think we face a danger of complacency from both governments and businesses because they now have much of what they were after?

Diane:  Yes, we do.  This is not a once and done kind of achievement.  It will take hard work to carry on with simplification and uniformity.

Russ:  How can we make sure Streamlined keeps its edge?

Diane:  I think educating tax administrators and policy makers in current member states is most important.  People change and we don’t want a current member state to let its membership lapse just because its personnel change.  We should also take advantage of changes in leadership in other states and see if we can persuade new member states to join.  The business community can communicate to policy makers and tax administrators how important uniformity across states is to them.  It has to be a collective effort.

Russ:  Everyone who knows you talks about the tremendous amount you gave to sales tax simplification efforts.  What did you gain from them?

Diane:  From my perspective, I developed a lot of relationships with tax administrators and businesses and their representatives.  You’d be surprised how many of those relationships have translated into contacts about Wisconsin tax matters.  I have always welcomed those contacts. I tell my staff that they too need to develop relationships with our stakeholders as relationships break down barriers and fears about tax administration.  We can solve problems together.

Russ:  If I were to ask employees at the Wisconsin Revenue Division what distinguishes you as a leader and manager what do you think they would say?

Diane:  I think they would say that I have been a visionary for the Wisconsin Department of Revenue and tax administration in general.  I think that they would say that innovation and excellent customer service are encouraged and expected.  I hope that I have communicated the importance of ongoing employee education, skills building and engagement.  And I hope the managers continue to develop relationships with our stakeholders that will take us to the next level in tax administration.

Russ:  You are a change agent.  Managing change in state government agencies is a tough job.  Major reorganizations can be especially challenging since they necessarily require changes in culture as well as systems.  In 2015 you undertook a full Audit Bureau reorganization.

A) What were your goals?  Diane:  Multiple goals came together.  Our Legislature budgeted for an additional 102 auditors and audit-related positions to bring in taxes already due as opposed to new taxes.  We reorganized staff by tax type so that our auditors weren’t having to learn both corporation franchise/income tax and sales and use taxes.  We thought they would be more efficient and effective.  We modified how we train auditors by alternating classroom and practical application for the first year. We dedicated the new positions to nexus determinations (businesses not filing and paying that should have been), out-of-state sales and use tax audits, multi-state corporate franchise/income tax audits, and the newer frontier—pass-through entity audits.  We did some workforce planning to the future as our staff started exiting for retirement.

B) How did it go? Diane:  It took a couple of years to get the new auditors trained and capable of       taking on larger audits but from our measures of success, it was a tremendous effort in achieving better compliance.  I think we are in a better position to deal with workforce retirements.

C) What were the key elements in your process that promoted success?

Diane: Employee training and mentoring, more pay progressions to hold on to experienced auditors, expanding two offices just outside of Wisconsin’s borders to expand our recruitment market and out-of-state presence, more data analytics in finding underreporting and non-compliance. 

D) It is relatively easy to understand the benefits to the Audit Bureau and Revenue Department from a successful reorganization like this.  What are the benefits for businesses?    Diane: Wisconsin has not had to raise any of the general business taxes because we are bringing in taxes already due.  In fact, since 2015, Wisconsin has reduced the individual income tax rates by about 14.6% which is attributable to a lot of factors.  You might recall that by law, Wisconsin used its additional revenue related to post-Wayfair sales tax collections to reduce income tax rates.  Additional revenues related to Wayfair, marketplaces and audits have allowed the policymakers to reduce individual income taxes.

Russ:  You have had a remarkable career, working with many government and business leaders.  What is your advice to tax professionals in state government and businesses who are just getting started in their careers?  

Diane:  Diversify your experiences and build your resume; continue your education; get leadership experience even if you are not a supervisor; help develop your co-workers; recognize that relationships are important to your success (consider all stakeholders (government and business)). Do what you love and love what you do.

Voluntary Disclosure Agreements: Getting Right With State Taxes

Richard Cram Photo.jpg

Richard Cram is the Director of the Multistate Tax Commission’s National Nexus Program in Washington, D.C. The National Nexus Program provides a Multistate Voluntary Disclosure Program that 38 states and the District of Columbia participate in. Cram has recently contributed articles to Tax Analysts State Tax Notes and has presented as a co-panelist at the Georgetown Law School Advanced State and Local Tax Institute and the Paul J. Hartman SALT Forum. Prior to his current position, Cram served for 15 years as the Director of Policy & Research in the Kansas Department of Revenue, and for 2 years as an attorney in the Legal Services Bureau of the Department, in Topeka, Kansas. He has worked as a research attorney for the Kansas Supreme Court, and practiced law as an associate in law firms in Chicago, Illinois and Goodland, Kansas. Cram graduated from the University of Kansas School of Law. He currently resides in Alexandria, Virginia.

Russ:  First things First.  In simple terms, what are voluntary disclosure agreements (VDAs) and what do they typically cover?  And importantly, what are their most common limitations? 

Richard:  A voluntary disclosure agreement is a contract between the taxpayer and the state tax agency, whereby the taxpayer acknowledges nexus with that state for certain tax types, represents its activities in the state and that the taxpayer has not had prior contact with the state, and agrees to perform the following within the required time period:  register, file returns, and pay  past due taxes (including interest) accrued during the state’s “lookback period” (which generally ranges from 3 to 5 prior tax years, depending on the state). In return, the state waives penalties and back tax liability owed prior to the state’s lookback period. 

Voluntary disclosure agreements are generally limited to sales/use taxes, income/franchise taxes, employer withholding taxes, or other excise taxes that the state tax agency administers, but not property taxes. Local taxes associated with these tax types are also included, unless the local tax is locally administered. In that case, the voluntary disclosure agreement would need to be entered into with that local administering authority, which is beyond the scope the MTC Multistate Voluntary Disclosure Program. 

Voluntary disclosure agreements do not protect the taxpayer against audit by the state for the time periods included in the lookback period and going forward. 

If the taxpayer has past due collected but unremitted sales tax or withholding tax, voluntary disclosure agreements generally do not include waiver of penalties or lookback period relief for those amounts. 

Russ:  How does a company most often find out that a VDA is something they may need to explore? 

When the company selling in multiple states seeks competent state and local tax professional advice, the consultant should alert the company to potential tax liability exposure, including the need to seek voluntary disclosure relief. Also, if the company is large enough to have staff dedicated to state and local tax compliance, that staff should be aware of such tax liability exposure and alert the company. Otherwise, it falls upon company leadership to stay abreast of state and local tax developments that may affect the company’s multistate tax liability exposure (such as the 2018 Wayfair decision and states’ enactment of sales/use tax economic nexus laws). The company needs to constantly maintain awareness of its current and historic physical presence and economic presence in all of the states where it is making sales or conducting other business activity. 

Merger and acquisition transactions often result in either the entity being acquired seeking voluntary disclosure relief prior to the transaction, or the acquiring entity seeking voluntary disclosure relief for the acquired entity after the transaction 

Richard:  With the Supreme Court Wayfair decision, widespread adoption of economic nexus thresholds, and other tax changes in recent years many companies are obligated to collect and/or pay taxes in many more states than previously.  Are you finding that many companies do not have sufficient awareness of their potential liabilities? 

Yes. A surprisingly large portion of small-to-medium-size remote sellers apparently still remain unaware of the Wayfair decision and states’ enactment of sales/use tax economic nexus laws.  

Russ:  Because of these changes in the tax landscape, are you seeing an increase in use of VDAs? 

Richard:  Yes. MTC Multistate Voluntary Disclosure Program applications have more than doubled since the Wayfair decision. However, we know that multiples more of businesses out there should be applying but have not yet.  

Russ:  Can VDAs be used for both sales tax and income and franchise taxes?   

Richard:  Yes. The taxpayer chooses in the application which tax types to propose including in the agreement, and one or more tax types can be included. Certainly, if the taxpayer has liability exposure for sales, income and franchise tax and has not had prior contact with the state concerning any of those tax types, they should all be included in the agreement. 

Russ:  If so, must the taxpayer enter into an agreement on both? 

Richard:  As mentioned above, the taxpayer decides in the application which tax types to propose to include in the agreement. When the taxpayer’s application is sent to the state for review, the state may determine that based on the facts represented in the application, the taxpayer has nexus for tax types in addition to the one the taxpayer chose in the application. Then the state may respond that the agreement needs to include those additional tax types before the state is willing to sign the agreement. At that point, the taxpayer can decide to enter into an agreement including those additional tax types, or withdraw the application. Keep in mind the taxpayer can apply to the MTC Multistate Voluntary Disclosure Program anonymously and is not required to disclose identity to the state until the state first signs the agreement and it is sent to the taxpayer for execution. 

Russ:  Given that the taxpayer will be making their presence known, are there any reasons not to include both taxes? 

Richard:  I cannot think of any. The taxpayer certainly wants to avoid entering into a voluntary disclosure agreement for one tax type with the state; Then after the taxpayer has already disclosed its identity to the state in that agreement, the state discovers that the taxpayer has nexus for additional tax types not included in that agreement. The taxpayer could then face back tax liability that would not be eligible for inclusion in another voluntary disclosure agreement. 

Russ:  Once a taxpayer concludes that they have an obligation to collect sales tax, they presumably lower their exposure if they begin to do so as soon as possible. I understand that doing so can actually disqualify a taxpayer from entering into a VDA in many states.  Is this true? 

Richard:  Yes. One of the qualifying criteria for voluntary disclosure relief with states participating in the MTC Multistate Voluntary Disclosure Program is that the taxpayer has not had prior contact with the state concerning that tax type. If the taxpayer has registered, filed returns, and remitted sales tax prior to applying for voluntary disclosure with that state for sales tax, then such prior contact would make the taxpayer ineligible for the MTC Program. The state already has the taxpayer’s identity. The purpose of voluntary disclosure relief is to provide an incentive for an undiscovered taxpayer to come forward to a state and become tax compliant, in return for the relief provided. 

We also see taxpayers who have collected but not remitted sales tax and not registered with the state prior to submitting their application for voluntary disclosure. While this will not disqualify the taxpayer from eligibility for voluntary disclosure, most states will not waive the penalties for failure to timely remit that collected sales tax. Registration for sales tax is what gives the seller the legal authority to collect that sales tax. A business that collects the tax without being registered is breaking the law. 

As long as the taxpayer waits to register and start collecting sales tax until after submitting an application for voluntary disclosure to the MTC Multistate Voluntary Disclosure Program, that activity would not be considered a disqualifying prior contact with the state. The taxpayer does need to disclose in the application the intent to register with the state after submitting the application. Otherwise, registration with the state may trigger notices from the state that otherwise would not be triggered if the state’s voluntary disclosure staff is aware that the applicant is registering with the state.  

Registration after submitting the application but before the state has signed the agreement would provide the state the applicant’s identity prior to the applicant knowing for certain that the state will enter into the voluntary disclosure agreement, but it does allow the applicant to commence collecting the sales tax sooner, thus reducing liability exposure for uncollected tax. 

When the taxpayer waits to register with the state until after the taxpayer receives the state-signed agreement, the taxpayer has assurance that the state is granting voluntary disclosure relief, assuming the taxpayer timely follows through with executing the agreement, registering, filing returns and paying back taxes for the lookback period. 

Russ:  This variation among states can be a real trap for an unsophisticated taxpayer.    Do you have suggestions as to how to deal with this problem? 

Richard:  With a few exceptions, states that participate in the MTC Multistate Voluntary Disclosure Program use the same standard agreement form. When the taxpayer submits an application to the MTC Multistate Voluntary Disclosure Program, selecting the states being applied to, MTC staff will send the taxpayer the standard agreement form for review and approval. Once the taxpayer approves that form (this does not require the taxpayer to sign anything—just approval to move forward with the process) MTC will use that standard agreement form to prepare a draft agreement for the state and send the application along with that draft agreement to the state, which will include the tax types to be included and the proposed lookback periods. If the state finds the draft agreement acceptable, the state will sign the agreement and return it to MTC staff, who will forward it on to the taxpayer, along with instructions for executing the agreement, returning it directly to the state, registering with the state, filing returns and remitting back taxes owed. The state could instead send a counterproposal back to MTC staff (which will be forwarded to the taxpayer) that might change the lookback period, request that additional tax types be included, etc. At that point, the taxpayer can decide whether to continue proceeding forward with the application or withdraw it. Since the taxpayer’s identity has not been disclosed to the state at that point, the taxpayer will be no worse off, should the taxpayer decide to withdraw. 

Even though states may vary on their lookback periods or other policies concerning voluntary disclosure, the taxpayer always has the option to withdraw from the process prior to executing the voluntary disclosure agreement that the state has signed, which is the final step in the process. 

Russ:  What are the other most significant variations among the states?  (e.g. lookback periods, taxes covered, what constitutes inability to use a VDA). 

Richard:  State do vary on the length of their lookback periods, and those can also vary, depending on the tax type. Income or franchise tax periods are generally measured in prior past due tax years, and sales tax lookback periods are measured in months (but roughly equivalent to the income or franchise tax lookback period). We publish on our website a spreadsheet showing the lookback periods for participating states in the Program, which is attached. 

Because the state tax agencies are the entities that participate in our Program, the tax must be administered by that tax agency in order for it to be included in a voluntary disclosure program. Thus, only local income or sales taxes that are centrally administered by the state tax agency can be included in the voluntary disclosure agreement. If the local taxes are locally administered, unfortunately, that means the taxpayer must seek voluntary disclosure directly with those local tax administration entities. For example, Colorado and Louisiana have locally administered local sales taxes, so to the extent those taxes are locally administered, they could not be included in a voluntary disclosure agreement with either of those states and would need to be the subject of separate voluntary disclosure agreements with those locally administered local jurisdictions. However, both states are working toward total central administration of their local sales taxes in the future. 

There may be some variation between the states on what they consider to be a prior contact that would disqualify a taxpayer for voluntary disclosure relief. 

Russ:  When does it make sense to use the MTC VDA process and when might it make more sense to go through individual states? 

Richard:  Of course, we like to think that it always makes more sense for the taxpayer to use the MTC Program for applying for voluntary disclosure to states that participate in our program, rather than applying directly to those states. But taxpayers certainly have the option of applying directly to the any of the states—even those that participate in the MTC Program. The taxpayer can apply anonymously to the MTC Program. The taxpayer needs to fill out one online application and submit it to us, rather than complete each state’s separate application form. We have a standard agreement form that most of our participating states use, rather than each state having its own agreement form. MTC staff serves as a single point of contact on behalf of the states during the voluntary disclosure process up to the point where MTC staff sends the taxpayer the state-signed agreement.  

Taxpayers can also apply only to one state, using the MTC Program. The application does not necessarily need to include multiple states. When the taxpayer has nexus and back tax liability exposure in multiple states, the taxpayer can choose which of those states it wants to apply to and does not need to apply to all of them at once. The taxpayer could later submit an application to those other states not initially applied to. 

Russ: This is pretty complicated stuff.  And the process assumes a need for anonymity and confidentiality.  Is it correct that VDAs are almost always handled by a tax professional on behalf of a company? 

Richard:  The majority of applicants retain a state and local tax professional to handle the voluntary disclosure application process for them, but we do see some business owners  who handle those responsibilities themselves. Determining the taxes that need to be included, the state and local rates in effect at the time of the transactions, and calculating the back tax liability exposure for current and prior years, as well as completing the state’s registration, return filing and tax payment processes can be significant tasks without professional help. 

As you mentioned, the taxpayer’s application is considered confidential taxpayer information, and MTC staff will provide that only to the state to which the taxpayer has applied. Other states are not made aware that the taxpayer has applied to any particular state. Also, once the taxpayer has submitted the application to the MTC Program, the taxpayer is considered to be “protected” from “discovery” by the state during the processing of the application (assuming the taxpayer is timely and actively pursuing the process). If the taxpayer is discovered by the state during the application process and the taxpayer receives an inquiry from the state concerning the tax type that the taxpayer is seeking voluntary disclosure relief for, that discovery will not affect the taxpayer’s eligibility to follow through and complete the voluntary disclosure process. If the application becomes dormant at some point, then that protection from discovery will be lost.  

Russ:  Once a VDA is signed and the taxpayer’s identity is disclosed to the State, do the agreements remain confidential? 

Richard:  Yes. The agreement itself expressly provides that the state will keep the agreement confidential except in response to an inter-government exchange of information agreement or pursuant to a statutory requirement or lawful order. 

Russ:  How long can a taxpayer expect the VDA process to last? 

Richard:  The pandemic has definitely pressured state tax agencies, leaving fewer resources for processing voluntary disclosure agreements. We are telling applicants to expect that the process could take six months. Some states are faster than others in processing applications. 

Russ:  About a dozen states do not use the MTC process, and giants CA and NY are among them.  Why do these states not use the MTC?  Are there major differences in their programs? 

Richard:  I wish I knew the answer to that question. If I did, we would certainly take action to try to address those reasons and get those states on board with our Program. All states, even our participating states, have their own voluntary disclosure programs to which taxpayers can directly apply, if they choose. We feel that the MTC Program makes the process more efficient for taxpayers applying to multiple states, so the taxpayer can complete one application form, instead of each state’s individual application form, and one standard agreement form can be used for each state agreement, instead of each state developing their own agreement form. Also, MTC staff functions on behalf of the states as a single point of contact during the voluntary disclosure process, up to the point when MTC staff sends to the taxpayer the state-signed agreement with instructions for completing the execution of the agreement, registration, return filing and tax payment directly with that state. 

All of the states’ voluntary disclosure programs are fairly similar: a nonfiler can come forward to the state, register, file returns and pay back taxes (plus interest) to the state for that state’s lookback period, and in return, the state will waive penalties and tax liability owed for periods prior to the lookback period.  

Russ:  It seems an important aspect in considering the use of VDAs is risk management.  Not just whether to do one or more, but what the timing should be.  What are some of the considerations and strategies companies may want to consider in making these decisions? 

Richard:  Proper risk management begins with staying abreast of state and local tax developments that affect multistate businesses. For example, prior to the 2018 Wayfair decision, the rule for sales tax nexus was physical presence: the only state a multistate seller had to worry about registering with and collecting sales tax was the state in which it was physically located. Since that decision, all states have implemented sales tax economic nexus with specific thresholds (sales volume or in some states transaction volume per year) that create economic nexus if exceeded. Thus, within a period of a year or two, a business making retail sales in several states in significant volumes can be exposed to enough back tax liability in multiple states sufficient to threaten that business’s continued existence. First and foremost, then, is staying informed of relevant state and local tax developments. 

Second, the business needs to track its multistate sales and constantly monitor sales and transaction volume, so the business can determine when it may have exceeded a particular state’s economic nexus thresholds, necessitating registration and collection of that state’s sales tax going forward. Businesses must also track where and when they may have physical presence (employees, representatives, inventory or other tangible or real property leased or owned) in a state. 

Ditto the above for income tax liability exposure in multiple states as well. Some states have also enacted economic nexus thresholds for income tax. P.L. 86-272 may offer protection against a state’s income tax for sellers of tangible personal property falling within the scope of protection of that law.  

If a multistate business timely monitors state and local tax developments and tracks its state tax nexus exposure in the states where it is carrying on business activities or making sales, it can register and stay in tax compliance before any significant back tax liability accrues. That would do away with any need to seek voluntary disclosure relief. Depending on its size and resources, the business can accomplish these tasks either with internal staff or by seeking outside professionals. 

Even when multistate nexus and back tax liability exposure has accrued for the business, the sooner it is discovered and acted upon the better, and the easier to resolve through a process such as voluntary disclosure with the states concerned. The MTC Program stands ready to assist, should that need arise. 



Bipartisan Tax Solutions Alive and Well at NCSL State and Local Tax Working Group

Erlinda A. Doherty is NCSL’s Director of the Budgets & Revenue Committee and leads the Executive Committee on State and Local Taxation Task Force. Prior to joining NCSL, Erlinda served on the Finance Committee of the South Carolina Senate for 5 legislative sessions, analyzing and compiling the state’s $7 billion budget, as well as staffing any fiscal-related legislation, including major legislation shoring up the state’s pension system. Erlinda’s diverse experience also encompasses government, congressional, and international relations positions in the federal government, the U.S. Army, and the private sector. Erlinda earned a Master’s degree in Public Policy from Georgetown University, as well as a Bachelor’s in Political Science and Middle Eastern Studies from Rutgers University.

Jackson Brainerd is Program Principal who oversees state tax, economic development, and gambling policy and staffs NCSL’s Task Force on State and Local Taxation and its Budgets and Revenue Standing Committee. Prior to joining NCSL in 2014, Brainerd graduated from Colorado College with a B.A. in Political Science and spent time with Governor John Hickenlooper’s Office of Correspondence. His written work and research on state fiscal policy has been cited by Bloomberg, Politico, Reuters, NPR, and the Wall St. Journal, among other publications.

Jackson, Erlinda, I really appreciate your joining us to tell us about the work of the NCSL Working Group on State and Local Taxation. 

NCSL (National Conference of State Legislatures) was founded in 1975 and quickly became the preeminent national organization for legislatures.  In 1999 the Executive Committee established the “Task Force on State and Local Taxation of Communications and Electronic Commerce.”  That Task Force’s charge evolved to cover corporate income taxes and other multistate tax issues and it is now simply the Task Force on State and Local Taxation.  The Task Force was named the Tax Organization of the Year in 2016 by State Tax Notes.   

Russ: The history above represents an expansion in interests and influence.  What accounts for the success and influence of the Task Force? 

Jackson: The success of the SALT Working Group is due in part to its longevity. It is NCSL’s longest standing task force; most of them disband after just a couple of years. As you mentioned, SALT was initially formed at the turn of the century to address the issue of remote sales tax collection. This turned out to be a topic that couldn’t be neatly resolved in a couple of years. When progress on the remote sales issue was slow, the group branched out into other areas of tax policy. Those ongoing efforts provided fertile ground for relationship-building and information-sharing. Many of our legislative members have been part of the Task Force for a long time and they’re all well-versed in multistate tax issues. The Task Force has also collaborated with the private sector to further its mission, so we have a number of long-standing relationships with leading groups from a wide array of industries. 

Russ: The Task Force was an early supporter, even an instigator of Streamlined Sales Tax, and has maintained its interest and involvement through the development of the organization into the current Governing Board.  Why was the SST movement of such great importance to the Task Force? 

Jackson: The Streamlined Sales Tax Project was an essential part of the effort to convince the federal government to provide for a national framework for the collection and remittance of remote sales taxes. Prior to the creation of SST, NCSL and other state and local organizations had worked since the late 1980s to reverse or mitigate the effects of two Supreme Court decisions (National Bellas Hess vs. Illinois and Quill vs. North Dakota) that had prevented states from requiring an out-of-state retailer to collect sales tax on items sold to state residents and hoped to convince Congress to assist them. The hope was that if states could prove they could work together to simplify their sales tax systems, then Congress wouldn’t view the imposition of collection requirements on remote retailers as overly burdensome. The Task Force created model legislation that directed state revenue departments to enter multistate discussions to simplify sales taxes, which eventually paved the way for the Streamlined Sales Tax Agreement. The goal of prodding Congress into action ultimately failed, but the SST movement clearly played a significant role in convincing the Supreme Court to overturn Quill in 2018, and the SSTGB’s ongoing mission of promoting sales tax simplification and uniformity still aligns with many of our Working Group’s priorities. 

Russ: What have been some of the other major initiatives of the Task Force, and what characterizes the issues the Task Force selects as a priority. 

Jackson: The Task Force generally focuses on multi-state tax issues related to the state/federal fiscal relationship. We’re not in the business of telling states what they should and should not tax; rather, we want to ensure that states continue to have the ability to maintain and modernize their revenue systems without undue interference from the federal government. We have tended to encourage uniformity when it comes to certain multi-state tax issues, which is generally desirable from a tax policy perspective, but uniformity can also serve to rebuff potential federal incursions into state taxing authority. In the past, the Task Force crafted model language around the implementation of E911 fees and the taxation of non-resident disaster responders. We’ve also adopted best practices or principles around a wide range of topics, including the taxation of online travel companies and short-term rental marketplaces, the taxation of cloud-based services, and tax expenditure reporting. 

Russ: Those initiatives are a very significant set of tax issues.  Looking to the future, what do the current Task Force leaders see as emerging issues they would like to focus on?  

Erlinda: It’s no secret that state revenue systems have not kept pace with economic changes that are now challenging the relevance of many tax categories. Value created in today’s economy increasingly does not involve property, consumption habits have shifted, physical goods continue to be replaced with similar, digital versions and capital and workers are more mobile than ever. Helping states respond to these changes and modernize their tax systems is a priority for the Working Group.  

We have increasingly focused on supporting a National Framework for taxing the expanding Digital Goods and Services market. NCSL will also continue to work on efforts to ensure the solvency of Social Security for generations to come. Additionally, NCSL will continue to engage on cryptocurrency issues as it becomes a more widely used medium. 

Russ: Marketplace Facilitators, Digital Goods, Communications, these are headliner issues.  The Task Force does a lot of work on more mundane topics, like tobacco taxes and E911 fees, on a continuing basis.  How would you describe the value of that steady attention to these “smaller” topics? 

Jackson: By focusing on “smaller” topics, NCSL can provide a wide range of expertise on all tax issues affecting states and keep states aware of the impact federal legislation may have on state legislation. This is especially important when considering that different states rely on different types of revenue. 

Covering a broad range of issues also helps keep our meetings interesting and our members well-informed and up to date on state tax policy in general. Plus, you never know when a more niche topic area will enter the spotlight. Tobacco taxes are a good example; the recent explosion in popularity of e-cigarettes and vaping devices was accompanied by many questions about how such products should be taxed. We were able to provide a forum for those discussions when the topic was still just beginning to percolate and garner national attention. 

Russ: State sovereignty is important.  So is the need to develop tax systems that work in a global and changing economy, to quote the Task Force, “in a manner that does not impede economic growth, provides clarity and simplicity to taxpayers and ensures the necessary revenue for appropriate government functions.”  That’s a tough balancing act.  How does the Task Force manage that, and what are some examples of how that balancing act has worked? 

Jackson: It is a bit of a balancing act. Even though the Working Group has promoted the benefits of uniformity in certain instances, we recognize that there can be political or fiscal barriers to achieving it and we don’t prod states into pursuing policies that they think would impinge on their sovereignty. We try to pursue bipartisan topics that both public and private sector representatives can agree need to be addressed. If you can garner a substantial amount of buy-in, it’s easier to persuade more skeptical parties to come aboard.  

The model legislation the Working Group approved around marketplace facilitators is a good example. We didn’t put it forward with the expectation that states would adopt the language wholesale, but with the hope that it could be used to provide some helpful guidance for states who were looking for an approach to taxing such platforms that had the approval of both Democrats and Republicans, along with many in the business community.  

Russ: Most of us who have had careers in or with government would be hard pressed to name a time that has been more deeply partisan.  Yet the Task Force has continued to function in a highly bipartisan manner.  What do you think are the characteristics of the organization and its members that account for that ability? 

Erlinda: I think there are several factors at play. Many of the priority issues of the Task Force over the years have not been particularly partisan. Especially when it came to remote sales tax collection, the “Kill Quill” supporters were from both parties and a wide array of business industries. Some of the more “niche” issue areas that have received task force attention are also, frankly, somewhat dense and boring and aren’t easily boiled down to left vs. right polemics.  

Furthermore, the charge of NCSL is to represent the legislative bodies of all states and territories, which comprise members from across the political spectrum. The leadership of state legislatures varies across the political spectrum. NCSL’s standing committees build upon this by each having a bipartisan co-chair as well as bipartisan legislative staff representation. Additionally, our policy directives and resolutions require bipartisan majorities to pass. Bipartisanship is the lifeblood of our organization, so we are unwavering in our commitment to it. I think our members understand and appreciate the value of having a truly a bipartisan entity advocating on behalf of states at the federal level and have seen that such an approach can produce tangible and lasting results.  

Russ: How would you describe the roles sponsors play for the Task Force? 

Jackson: NCSL would not be able to do our important work without the help of our sponsors. Sponsors play an integral role in providing funding as well as expertise to the committee’s work. Many of our sponsors are represented by tax wonks who have worked in state tax/revenue departments as well as the private sector and are willing to lend their deep knowledge to task force discussions and in the development of tax force policies and resolutions. 

Russ: Most small and medium size businesses don’t have the resources to be sponsors of the Task Force.  Are there ways for them to follow and be involved in the work the Task Force does on issues of importance to them? 

Jackson: We strive to provide balanced perspectives at our Working Group meeting sessions and have hosted many small business-affiliated associations to discuss various tax issues. NCSL is happy to work with businesses that want to engage, and we’re always open to hearing new ideas from businesses of all sizes. Our meeting agendas and presentation materials are publicly available on our website. Our priorities flow from our legislative membership, so if state legislators are hearing about pressing small business tax issues in their state, there’s a good chance it’ll be on the agenda at our meetings.  

Russ: Looking back 20 years from now, what would the Task Force leaders like to say was accomplished?  

Erlinda: First and foremost, that the SALT Working Group accomplished its original purpose of giving states the ability to collect remote sales taxes and helped change the national sales tax landscape for the better. Beyond that, we hope that the Working Group was able to help guide states towards effective tax policy solutions on a wide array of issues, that it helped lay the groundwork for continuing bipartisan collaboration, and that it facilitated many lasting friendships. 

Understanding the World of Marketplace Facilitators: An Interview with Richard Cram


Richard Cram is the Director of the Multistate Tax Commission’s National Nexus Program in Washington, D.C. The National Nexus Program provides a Multistate Voluntary Disclosure Program that 38 states and the District of Columbia participate in. Cram has recently contributed articles to Tax Analysts State Tax Notes and has presented as a co-panelist at the Georgetown Law School Advanced State and Local Tax Institute and the Paul J. Hartman SALT Forum. Prior to his current position, Cram served for 15 years as the Director of Policy & Research in the Kansas Department of Revenue, and for 2 years as an attorney in the Legal Services Bureau of the Department, in Topeka, Kansas. He has worked as a research attorney for the Kansas Supreme Court, and practiced law as an associate in law firms in Chicago, Illinois and Goodland, Kansas. Cram graduated from the University of Kansas School of Law. He currently resides in Alexandria, Virginia. 


Richard, thanks for being with us today and wading into the complicated world of marketplace facilitator laws and their requirements.  

For those of you who think tax administrators are not fun, you should know that Richard enjoys ballroom dancing. He has mastered intricate steps in tax and on the dance floor. 

There are a lot of intricacies in marketplace facilitator laws that we don’t have the time to get through, so today I’d like to focus on some of the larger questions around these laws. 

Russ: But let’s start with the most basic question. What is a marketplace?  

Richard: Some states have defined that term in their statutes. For example, Connecticut defines “forum” as follows: “a physical or electronic place, including, but not limited to, a store, a booth, an internet website, a catalog or a dedicated sales software application where tangible personal property or taxable services are offered for sale.” 

When that term “marketplace” is used nowadays, everyone thinks of an electronic platform or website on which products are marketed, although states defining that term are careful not to limit it to electronic, out of concern not to run afoul of the Internet Tax Freedom Act. 

Russ: I can’t think of any group of major sales and use tax law changes that comes close to the rapidity of adoption and their impact and ramifications as the various marketplace facilitator laws adopted over just a few years. What do you think accounts for this? Was it simply a gold rush by the states to grab revenues?  

Richard: State tax laws are usually about 10 years or more behind the times in keeping up with trends in business or technology. While states were still focused on how to increase seller compliance with internet sales generally starting in the 1990’s (facing the Quill physical presence nexus rule as the major obstacle), the marketplace facilitator business model took off in the early 2000’s and has experienced phenomenal growth since then, now accounting for the dominant share of internet sales transactions. The marketplace facilitator business model was cleverly structured to make the marketplace seller the party responsible for registering and complying with sales tax laws.  

With the Quill physical presence nexus rule, marketplace sellers generally thought they were “off the hook” from collecting any sales taxes, because they lacked physical presence in the states where their internet customers were located. But as marketplace facilitators’ footprints expanded with warehouses in many states, and as marketplace seller inventory filled warehouses, sales tax liability exposure greatly increased for marketplace sellers. States soon recognized that it would be much more efficient to require marketplace facilitators to collect and remit the sales tax on facilitated sales, rather than attempting to track down many thousands of small marketplace sellers and get them in compliance.  

However, states also realized that their sales tax laws were not structured to accommodate the marketplace facilitator business model. Unless their laws changed to make the marketplace facilitator the retailer instead of the marketplace seller, states were not going to succeed in collecting any significant sales tax revenues from facilitated internet sales, which were rapidly becoming the largest portion of internet sales. 

Colorado’s successful 2016 litigation in Direct Marketing Association v. Brohl upheld their new sales tax compliance law that gave remote sellers above a certain sales volume threshold the option of either collecting sales tax on their remote sales or reporting those transactions to the state tax department. This set the stage for states to begin putting in place a viable collection model for facilitated internet sales. A few states put in place such laws in the 2017 legislative session.  

For marketplace facilitators, it was obviously simpler to comply with the tax collection requirement rather than go through the reporting process—in addition to the customer relations issues that would create, so they began complying with those new laws. Other states saw the great promise of those laws, so many looked forward to putting similar laws in place in the 2018 legislative session.  

After the 2018 Wayfair decision, which did away with the physical presence nexus rule, states quickly realized that the “option” to report or collect was no longer needed. A collection requirement could be imposed on marketplace facilitators—as well as direct internet sellers. This was the states’ chance to greatly expand sales tax compliance with internet sales: require all remote sellers above the specified economic nexus threshold to collect sales tax, and also require that marketplace facilitators be the tax collectors on facilitated internet sales. 

Because facilitated internet sales had become the largest portion of internet sales, states needed to enact both sales tax economic nexus laws and laws requiring marketplace facilitators to collect on facilitated sales in order to effectively capture any significant sales tax revenue from internet sales. It was literally an “all or nothing” proposition for the states, so that made it a very easy decision for them to proceed with enacting those laws—which all states that impose sales tax have now done. Even so, marketplace facilitators and sellers operated for a good ten years (at least) without any effective sales tax collection mechanism in place in state law, before states finally began to catch up. 

Russ: You ran the Multistate Tax Commission (MTC) process that developed a white paper on Marketplace facilitators. What was that process like? But first can you give us a quick explanation of what the Multistate Tax Commission is? 

Richard: The Multistate Tax Commission is an intergovernmental state tax agency working on behalf of states and taxpayers to facilitate the equitable and efficient administration of state tax laws that apply to multistate and multinational enterprises. 

That was a very exciting time in the wake of the Brohl and then the Wayfair decisions, as states scrambled to put in place the laws that would allow them to collect desperately needed sales tax revenue on internet sales. Major companies also realized that these laws were coming, so industry representatives were anxious to get involved in the process of their development, in hopes of seeing some uniformity and administrative simplification in them. By the time the Uniformity Committee took up this project in the fall of 2018, a few states had already put in place marketplace facilitator laws, and several state legislatures had such laws pending. So, it was important to get a work product from the Committee out as soon as possible, in hopes of providing guidance to states considering adopting such laws.  

The Committee formed a work group and recruited participants from the states and industry, and thereafter the work group developed a list of about a dozen key issues to go through and attempt to resolve, seeking input from all interested parties as we proceeded through each issue. Because some states already had marketplace facilitator sales tax laws in place, it soon became apparent that the work group was not going to come up with a single, uniform model legislative proposal. The best that could be achieved was to summarize a couple of major approaches to each issue, along with the pros and cons of each approach. For example, one of the biggest issues was how to define “marketplace facilitator.” Washington had developed a “broad” definition, which some states had copied, while a “narrow” definition surfaced in other states’ legislation.  

The business community overwhelmingly preferred the “narrow” definition because it required the facilitator to handle the customer’s money, while the broad definition was not so limited. Also, the business community worked with the NCSL (National Conference of State Legislatures) SALT (State and Local Tax) Task Force to develop model legislation for states to consider using in imposing sales tax economic nexus and marketplace facilitator collection laws. This model is included in the White Paper as an appendix. The work group succeeded in producing the White Paper in time for its use by 2019 state legislatures in developing their laws. The White Paper has been updated each year since the 2018 version to include additional states’ legislation. The 2021 update includes the legislation adopted by all sales tax states. The White Paper remains posted as a resource on the MTC website 

Russ: NCSL did adopt a model statute. How do you think that fits in with the findings of the MTC White Paper? 

Richard: As mentioned, the White Paper does include the NCSL model in its appendix. The MTC was asked by industry representatives to endorse the NCSL model, but the state participants in the work group and the Uniformity Committee indicated a reluctance to do that, particularly because many states already had their sales tax economic nexus and marketplace facilitator laws in place, many of which differ from the NCSL model.  

However, it is clear that the NCSL model has been influential on state legislatures, particularly with the states that have most recently adopted this legislation. The NCSL model includes the “narrow” definition of marketplace facilitator, and as of now, most of the states adopting marketplace facilitator collection requirements are using the “narrow” definition. The NCSL model also recommended adding flexibility to the marketplace facilitator law by including exclusions for certain industries (such as payment processors, advertisers, etc.), allowing the facilitator and marketplace seller to agree on which party has the collection obligation, and allowing the department to waive the collection obligation. Some of the states have adopted those features. 

Russ: So there are marketplace facilitator giants that are household names like Amazon, Wayfair, and Ebay. And some very large retailers who also are marketplace facilitators, like Walmart. Who else is out there? Can you describe the variety, numbers, and niches they fill to any degree. And how does this create opportunities for sellers?  

Richard: I have to confess a lack of knowledge concerning this. Etsy, of course, should be added to the list. I understand there are some small, very specialized marketplace platforms in certain niche industries out there that were surprised to find that they fit within the “facilitator” definition in certain states.  

Russ: It seems like a lot of those marketplaces, especially the smaller ones, could benefit from CSPs. Have you seen any of that? How could that be encouraged? 

Richard: Again, I’ll have plead lack of knowledge concerning this. I would think that smaller marketplaces would certainly be a good market for CSP’s, especially if they will have new tax collection return filing responsibilities as a result of the state’s facilitator legislation. Marketing efforts to these business would certainly be productive, I would think. 

Russ: Are there traps or dangers sellers need to be aware of among the proliferation of marketplaces? 

Richard: I don’t claim any special knowledge here, but certainly, anytime you are looking to “sign up” with a contractor of any kind, you want to be aware of their history, financial solvency, reputation, etc. and feel comfortable dealing with them. Certainly, you should carefully read and understand the provisions in any agreement that you enter into with a facilitator, know what your contractual obligations are, and also those of the facilitator. In terms of marketplace facilitator laws, the major issue to be aware of is that generally most of these laws will allow the marketplace facilitator to shift liability for failing to collect the tax to the marketplace seller, if the marketplace facilitator can show that the marketplace seller failed to provide certain information to the facilitator or the information provided was incorrect. You should agree up front with the facilitator what information, if any, you are responsible to provide to them.  

Be sure to maintain good records, in case the time comes where the facilitator claims you provided incorrect information or failed to provide certain information, and the facilitator is attempting to pass liability to the state for uncollected tax off to you. It would also be helpful to be aware of the marketplace facilitator law provisions in the states you are selling into. A few of those states may still require you to register and file returns—even when you are using a marketplace facilitator. You may be required to report your facilitated sales as a deduction on your return. Also, if you are a multichannel seller, you likely have an obligation to collect and file on your direct internet sales into the state. 

Russ: Are there traps or dangers new or small marketplaces need to be aware of? 

Richard: Again, no special expertise claimed in this area, but you want to be familiar with the sellers you are dealing with. Since most state facilitator laws allow you to pass liability for failure to collect to the seller when the seller provides incorrect information or fails to provide information, you also need to keep good records so such failures can be documented and proven. Of course, you need to be thoroughly familiar with the laws and tax administration procedures of the states in which you are facilitating sales, since you will be collecting sales tax and filing returns on those facilitated sales.  

Russ: What do small or new marketplaces need to be aware of as they develop? 

Richard: Staying up to date on the states’ tax laws in which they are selling is of utmost importance. Also, a growing trend is for states to expand the collection requirement to include other types of excise taxes that may apply to certain taxes (local lodging taxes, battery or tire fees, 911 fees, other telecommunications taxes, etc.). You need to be aware of any new tax collection obligation that may apply to any of your facilitated sales. 

Russ: This sea change in tax administration, collection, remittance, and the varying requirements is dizzying not just to the average taxpayer, but to the average tax practitioner. Definitions of marketplace facilitators, thresholds, and other key terms vary enormously. So do reporting requirements. How can an ordinary businessperson make sense of it all? 

Richard: This is where a top flight CSP or other SALT tax advisor comes in! You are seeing a few trends toward uniformity with the economic nexus thresholds: most states are using $100,000 sales volume and are starting to drop the transactions threshold. Also, as mentioned, most states are now using the “narrow” definition of marketplace facilitator. 

Russ: Is it possible some businesses might be marketplaces and not even realize it? What specifically should they be looking for? Are they OK if they never handle the money? 

Richard: Yes, certainly in states that use the “broad” definition of “marketplace facilitator.” For a state that has adopted the “broad” definition but has not adopted any exclusions from that definition, advertising or payment processing activity could be enough to fall within the definition. Handling the customer’s money is not required under the broad definition. If the definition includes exclusions, or the state’s law allows the parties to negotiate who has the collection obligation or allows the department to waive the collection obligation, this adds some flexibility. 

The narrow definition requires the facilitator to handle the customer’s money. However, even if the facilitator does not directly handle the money but appears to have control over the entity that does, states using the narrow definition may still view that control as being equal to directly handling the money. A ruling should be sought from the state tax department when there is doubt. 

Russ: Many taxpayers are familiar with physical nexus and the requirement to collect if you have physical presence in a state (locations, staff, inventory). Economic nexus thresholds are newer. Did the U.S. Supreme Court Wayfair decision allowing states to collect sales tax from remote sellers directly lead to economic nexus thresholds and marketplace facilitator laws? 

Richard: The New York “click-thru” nexus law (which many states also adopted) and the Colorado “option to collect or report” law litigated in Direct Marketing vs. Brohl had $10,000 economic nexus thresholds in them, but Wayfair certainly ushered in the $100,000 gross sales volume/alternative 200 transactions threshold that many states have now adopted. As discussed above, the marketplace facilitator laws got off the ground in 2017, before Wayfair, but Wayfair certainly accelerated their adoption afterwards. 

Russ: These thresholds seem to be all over the map.  The size, what sales are included, receipts vs. number of transactions. Why do you think states took such different approaches, including the usually uniformity conscious Streamlined Sates, in setting thresholds? If you ruled the world, what type of threshold would make the most sense? 

Richard: South Dakota included the $100,000 gross sales/200 transactions threshold in its economic nexus law, which was successfully litigated in Wayfair. A number of other Streamlined states adopted similar legislation, either contemporarily with South Dakota, or immediately after the decision. The fact that the Court did not strike down South Dakota’s threshold probably convinced a lot of states to simply adopt that same threshold, since it had already passed court scrutiny. Some states are beginning to eliminate the transactions threshold, discovering that a seller could easily hit that threshold, even with a very low sales volume, if inexpensive items are sold in large volume. The $100,000 sales volume threshold has been adopted by almost all of the sales tax economic nexus states. Only a few states have adopted higher thresholds (TX NY CA $$500,000, MS AL $250,000), although varying criteria are used in measuring sales volume (gross sales vs. retail sales vs. taxable sales). 

A $100,000 sales volume threshold based on retail sales seems to be the sensible threshold right now. This would exclude wholesale sales, which are not taxable. As everyone gets more used to sales tax collection in the electronic environment, states are hoping that some day the $100,000 sales volume threshold can head downward. 

Russ: How does an individual seller’s sales on their own platform or at their own physical location work in conjunction with their facilitated sales? 

Richard: This varies by state. Many states require the seller to measure its economic nexus sales volume threshold by including both direct and facilitated internet sales into the taxing state. Some states do not require facilitated sales to be included in the sales volume threshold, if the facilitator is required to collect on those sales. For sales taking place at the physical store location, obviously, sales tax is due on all of those sales to the home state.

Russ: It doesn’t seem like states have been quick to adopt NCSL recommended provisions or make extensive use of the MTC White Paper. Of course during this period they were occupied with the Covid pandemic and responding to that. Most states have done better than expected with revenues. As things settle down are you optimistic that states will achieve more uniformity in how they treat marketplace facilitators and sellers? How can interested businesses influence these decisions? 

Richard: The NCSL model was not officially approved by the NCSL until after many states had already adopted their marketplace facilitator tax collection laws, so that is probably the main reason so many state statutes do not include its provisions. My experience with state legislatures has been that legislators are much more likely to pay attention to a lobbying effort by the business community than by the state tax department. Thus, strong business community lobbying efforts to move states toward the NCSL model could be fruitful. However, there is always a certain amount of inertia that will be encountered against making changes to an existing statute, particularly when it has been on the books only a few years and appears to be working OK. If a showing is made that a particular provision (or lack of a provision) has created problems, legislatures are more likely to be amenable to make changes to correct the problem.  

Russ: Richard, thanks for helping us understand the marketplace facilitator world. There are lots of resources to show you what you have to do to comply. But you’ve given us a lot of context for understanding the why–the history and confluence of events that help explain how we ended up with such a variety of provisions in these laws. You have also given us a great window in to how the MTC works with states and business stakeholders. 

Streamlined Sales Tax Leaders Featured in Inaugural TaxCloud Interview Blog

TaxCloud begins today a series of monthly interview blogs with key players and experts in the world of sales and use tax compliance, innovation, and expertise. It is fitting that we start with the top leaders of the Streamlined Sales Tax Governing Board. The 24 Streamlined member states have made major contributions to tax simplification, education, and innovation. A very notable innovation was the development of certified service providers to make sales tax compliance easy for sellers while maintaining tax policy flexibility for legislatures. We want to thank Senator Ann Rest and Executive Director Craig Johnson for being so generous with their time and insights. We hope these interviews broaden and deepen the understanding of sales and use tax. 

Senator Ann Rest of New Hope, Minnesota is currently the DFL Leader of the Senate Taxes Committee, and has served in the Minnesota Senate since 2001. She has served as President Pro Tem, Vice-Chair of the Senate Taxes Committee, and Chair of the Property Taxes Division. She chairs the Financial Audit Subcommittee of the Legislative Audit Commission. Ann served 16 years in the Minnesota House and served two terms as Chair of the House Tax Committee (1993-1997). She is a retired CPA with a master’s degree in Business Taxation from the University of Minnesota and a master’s in public administration from the John F Kennedy School of Government at Harvard University. She is the current president of the Streamline Sales Tax Governing Board.

Craig Johnson, Executive Director of the Streamlined Sales Tax Governing Board since 2013, is the current COO of this 24-state government collaborative organization, which is focused on simplifying and modernizing sales tax administration. He supports and helps lead the work of the Governing Board and its committees.   

Craig has a deep background in state sales taxation, having worked at the Wisconsin Department of Revenue for over 20 years, and serving as a representative of Wisconsin on various committees of the Streamlined Sales Tax Project beginning in 2006. He was a Revenue Field Auditor and a Sales and Use Tax Specialist in the Department’s Administration Technical Services Unit. He was also instrumental in drafting the legislation and implementing the necessary changes when Wisconsin conformed its laws to the requirements of the Streamlined Sales and Use Tax Agreement. Craig is a frequent speaker on sales and use tax issues and is a certified public accountant. 

Russ: Craig, Senator Rest, thanks for joining us today. The SSUTA Agreement’s fundamental purpose is to simplify and modernize sales and use tax administration in the member states, in order to substantially reduce the burden of tax compliance. The Agreement focuses on sales and use tax administration systems for all sellers and for all types of commerce. 

What are some of the most important things the Streamlined states have done to accomplish this purpose? 

Senator Rest: The first thing the SST project members did was to partner with business community representatives to identify the complexities of sales and use tax requirements faced by multistate retailers. Next, they systematically worked together to find solutions that worked from both business and states’ perspective. This collaboration really brought the stakeholders together towards one clear goal.  

In fact, thanks to several years of hard work by dozens of delegates, major simplifications were made, and the requirements for member states were reset to greatly reduce the burden on sellers, making compliance with sales and use tax laws much easier – and more uniform. As our business partners know from painful experience, every difference in state laws makes compliance harder. 

I think the three most significant early achievements were the implementation of the Streamlined Central Registration System, the development of the Certified Service Provider Program (which your company has been part of since 2010), and the liability relief provisions. We also worked to adopt uniform definitions and administrative practices, among other provisions.  

Russ: Let’s start with the Central Registration System. Why is that a big deal? 

Craig:  Before SST, a seller had to separately register in every member state, each one of which had its own requirements and requests for various pieces of information. Some of these individual state applications were (and continue to be) quite lengthy. In addition, many states charged fees just to get registered, so the costs really added up. With SST, a merchant can now register in all 24 member states with one single application, and, more importantly, it’s free to register. 

In fact, when we updated our registration system back in 2015, we specifically developed the new Streamlined Sales Tax Registration System (SSTRS) to require as little information as possible. States can gather additional information later if they need to but getting registered in the SST states is about as easy as it can get now. 

Russ: How does that translate to someone who is still on the fence about registering and joining the SST program? 

Craig: I knew making the registration process quick and easy was important but what I heard from a former state tax administrator now working for a private firm really helped me understand how much we had improved this process. He told me that for one client the firm had spent many hours completing each of the non-member state’s individual sales tax registration applications. He would gather information, think he had it all, only to find the next state wanted something different. Then once he was done, they had to wait for weeks in some cases before they ever heard anything back from the state to know they were in fact registered. 

For the Streamlined member states, he registered them through the SSTRS and was done with all 24 states in a matter of minutes, as opposed to hours (or days) and received the registration confirmation from the SSTRS immediately. 

Russ: Senator, I’ve heard both you and Craig say many times that the CSP (Certified Service Provider) program is integral to the success of SST and central in helping multi-state sellers comply with the complexities of sales and use tax laws and regulations. In your mind, what are the key aspects of the CSP program that have made it such a success for multistate sellers? 

Senator Rest: SST and the CSPs have harnessed technology to make sales tax compliance very straightforward. Craig can give you more details, but the main point is that a seller can easily just turn over its sales and use tax obligations to a third-party provider (CSP) with confidence that its returns and remittances will happen timely and accurately for little or no cost. And they have liability protections as well. 

Craig:  I tell businesses to think of CSPs as a way to efficiently and inexpensively outsource one of their most complex and difficult chores. They’ve done it for years with outsourcing their payroll processing, and with the CSP program, businesses have an opportunity to outsource state sales tax. One key difference is businesses must pay for all outsourcing of payroll. Because we compensate CSPs for handling the core obligations for multistate sellers, participants can receive CSP services for little or no cost when they fall under the definition of “CSP compensated seller.” 

Russ: Craig, can you explain more of the details of how the CSP program actually works? 

Craig: The CSPs have developed tax calculation software programs or tax engines that integrate with the seller’s e-commerce ecosystem (shopping cart software, Enterprise Resource Management platforms and other systems). Through this integration the CSP is able to help the seller calculate and collect tax very quickly — and do it with a high degree of accuracy and complexity. 

The CSP’s tax engines determine more than just product taxability. They also look at which state and local taxing jurisdictions are entitled to the tax, what the rates are, and ultimately how much tax is due to each jurisdiction. CSPs also demonstrate through test data provided by the SST states that they can accurately calculate, prepare, and file the simplified electronic return with each of our member states. They then instantly (electronically) transmit the required payments. 

Russ: How do you choose which companies are accorded the CSP designation? Can anyone apply to become a CSP? 

Part of our vetting process of every CSP is through the use of “test decks.” Each state puts together their own set of transactions for the CSP to run through their system. When you think about all of the types of products sold and the number of different state and local taxing jurisdictions, this can involve thousands upon thousands of test transactions. The CSP is not certified until they demonstrate they handle the tax treatment of all these transactions accurately in every member state. We also make sure the CSPs are keeping their systems up to date. We do this by requiring the CSPs to run new test decks for the states every quarter. 

CSPs also need to protect personally identifiable information, set up a trust bank account to handle the funds transfers from the sellers to the CSPs and the CSPs to the states, and they must meet key security requirements. The numerous other requirements are spelled out in the Governing Board rules that CSPs must follow and agree to before the Governing Board can enter into a contract with them. 

And yes, anyone can apply to be a CSP. The process is very rigorous, however, so only the most qualified and serious applicants stay the course. 

Russ: What do you see as some of the greatest benefits to sellers of using a CSP? 

Craig: There are several benefits to sellers using a CSP. First, as I already mentioned, CSPs are a way for sellers to outsource nearly all of their sales and use tax reporting obligations. This lets sellers focus on growing their business as opposed to worrying about their sales tax calculation and reporting deadlines and obligations. 

Sellers also gain peace of mind. The CSP assumes responsibility and liability for the proper calculation of sales tax and preparing and filing the required returns. Sellers just need to make sure they provide their CSP with accurate details of the transaction – who the buyer is, what product is being sold, the selling price, where the product is being delivered to the customer, and the date of the transaction. 

Russ: What about audits? 

Craig: CSPs are responsible for handling any audits the member states may conduct as well as notices the states may send to the seller related to the returns filed by the CSP. Sellers know how time-consuming audits can be, and, under the contract the CSPs enter into with Streamlined, the CSPs agree to handle these audits for their CSP-compensated sellers. Of course, the CSPs might occasionally need to go back to a seller for additional documentation or explanations of some transactions, but the states work directly with the CSPs to resolve the audits – not the sellers. 

Russ: Senator Rest, what types of benefits do the states receive and why are they willing to compensate CSPs for handling seller’s sales tax obligations: 

Senator Rest: All states’ sales tax collections rely heavily on voluntary compliance and the efforts of sellers to properly calculate, collect and remit the tax. As Craig explained, states have much more confidence that the tax determinations being made by sellers who are using a CSP are correct due to the upfront review of the CSPs system and the ongoing testing of these systems. Having this confidence in the CSP systems helps reduce the resources states must commit to enforcement activities. States also know that the CSPs will file their client’s returns electronically and in a timely manner along with the tax payment. 

While the SST states want to make things as simple as possible, they also want to make their own choices about tax treatment. The technology provided by CSPs makes both things possible. The Streamlined States recognized that with the growth in e-commerce they needed to find a way to make it easy for sellers, particularly sellers not physically located in their state, to properly collect and remit their taxes.  

As an elected official, I also wanted to find ways to make it easier for my constituents to be able to comply with sales tax collection requirements in other states. That way they can grow their businesses and ship their products to other states without having to worry about figuring out all the nuances of other states’ sales tax laws. The CSP program helps accomplish this. It’s easier for sellers to comply because the technology does all the work about determining taxability. 

Russ: Can we talk about the liability relief provisions? One of the things that scares sellers the most about the complexities of selling and remitting taxes in multiple states is the concern over liability when the laws are so complicated. How do your liability relief provisions assist taxpayers? 

Senator Rest: Russ, one of the great things about Streamlined and the member states that really helps multistate sellers is transparency and states taking ownership of and standing behind the information and guidance they provide to sellers. Craig can provide some additional details, but every member state has to put together a taxability matrix to let sellers know what is and what is not taxable in their state. It doesn’t cover every product, but it covers the great majority of them. The states also have to put together rate and jurisdiction databases that detail the state and local tax rates that apply within their state based on addresses and/or zip codes. Sellers that rely on and follow this information provided by the states to the CSPs are relieved of liability if the state ultimately determines a particular transaction should have been handled differently. Multistate sellers and accounting firms alike really appreciate this aspect of the SST program. 

Craig: And I would add that the taxability matrix really expands a seller’s liability protections – and helps ensure the proper tax is calculated. The CSPs, based on information received from their clients, know what types of products are being sold. If a client is selling a type of product that does not fall squarely within a particular category covered by the Streamlined Taxability Matrix, the CSP can put together additional product categories, complete with a description of the types of products included in the category and have that category reviewed and the tax treatment of the category certified by every member state. Once all the member states certify the tax treatment of these additional product categories, sellers can be  assured that, if they properly classify their products within one of these certified categories, they will be protected from liability. Sellers only need to categorize or map their individual products once in the CSP’s system. Once the product is mapped, the CSP’s system takes care of applying the appropriate tax to the products classified in each category for all of the member states. 

Russ: Senator Rest, Craig, do you think the CSP program is working as intended? 

Senator Rest: I do. The CSP program is about more than just the dollars collected and remitted to the states. It is about removing the burden on sellers, particularly multistate sellers, of having to calculate the appropriate tax, prepare and file the required returns and make the required remittances. We want sellers to be able to focus on growing their business and being successful, and the CSP program helps them do just that. 

Craig: Oh yes. Since the Wayfair decision, we have seen the number of sellers registered through Streamlined that are using CSPs quadruple. I also want to stress the importance of the accuracy of sales tax collections by sellers using CSPs. As Senator Rest said, the CSP program is not just about the dollars collected – it is also about the accuracy of the collections – and protections it offers the sellers. No seller wants to find themselves in a position where they over collect the taxes due on multiple transactions and face a possible class action lawsuit. At the same time, no seller wants to under collect the tax and face a possible qui tam lawsuit or assessment by a state if they are audited. The CSP program helps provide these protections. 

Russ: Currently there are 24 states covered by the contracts between the CSPs and the Streamlined Sales Tax Governing Board. What are you doing to encourage the other states to participate? 

Senator Rest: I would like to see every state that imposes a sales and use tax to participate with Streamlined in some manner. About a year and a half ago, we adopted a resolution that allows a nonmember state to participate with the Governing Board if the state adopts some of the most important simplification and uniformity provisions contained in the Streamlined Sales and Use Tax Agreement. We recognize not every state may be able to adopt every requirement contained in the SSUTA, but we also recognize the burdens that sellers face, including my own constituents, making sales into these other states if those states are not doing anything to make it easy for them to comply.  

We can continue to reach out to states to encourage them to participate, but we also need those businesses that are adversely affected by a state not participating to reach out to those states and their legislators to explain why their state’s participation is so important. 

Craig: Yes, we continue to reach out to the nonmember states to encourage their participation. We point out the benefits that will be realized by both the sellers and the states if the state is willing to make some simplification and uniformity improvements. There’s a real possibility that states failing to make improvements may face legal challenges on their authority to collect from remote sellers because of undue burdens on Interstate Commerce.  

We highlight that states can help minimize the risk of such a challenge by doing things such as setting up a rate and jurisdiction database, putting together a taxability matrix, participating in the central registration system, participating in the contracts we have with the CSPs, and providing liability relief to sellers who follow the directions provided by the states. 

Russ: What types of things has Streamlined recently completed or is Streamlined currently working on to help sellers comply with the member states’ laws?   

Senator Rest: Craig can talk a little bit about some of our more recent specific projects, but as a State Senator, I hear from constituents about the challenges they face not only with respect to sales tax laws but in all aspects of their business and personal lives. I have truly appreciated how the states and business community have been able to sit down together at the table to discuss issues of concern and work cooperatively to find solutions. We have resolved a lot of different issues and will continue to discuss and consider additional issues as time goes on.  

Craig: One project we recently completed was the development of numerous disclosed practices related to each of our member state’s remote sales tax collection requirements, marketplace seller requirements and marketplace facilitator requirements.  

Since the Wayfair decision, every state with a sales tax has now enacted some type of “economic nexus requirement.” Unfortunately, states are not all uniform in what requirements a seller must meet before they are required to collect and remit a particular state’s sales or use tax, how their thresholds are calculated, etc. The purpose of the disclosed practice is for the states to clearly layout what their requirements are so sellers can easily determine in which states they do or do not have a sales or use tax collection and filing requirement. In fact, Russ, that would be a good future blog. 

Russ: Actually, Craig we are already planning to cover that topic in one of our next blogs. Watch this space. What other projects you are working on right now? 

Craig: We are working on two projects now of note. One is a project that likely affects every seller and purchaser. We are revising the Streamlined Certificate of Exemption. We want to make it easier for purchasers to understand what they are required to provide to claim certain exemptions in the member states and for sellers to know what they are expected to obtain from purchasers to support the exemption taken and to protect them from potential liability. 

Another project relates to the continued growth and evolution of digital transactions. As more and more transactions become strictly digital in nature (i.e., no tangible property is shipped to the customer), sellers only need limited information from a customer to complete the transaction. If only limited information is obtained, this causes challenges for the seller in determining which state and local jurisdictions are entitled to the tax on such transactions. The states and business community are actively working together to determine how to best handle these types of transactions. We work really hard to be responsive to the world of e-commerce as things evolve and understand that a collaborative effort helps make things better and simpler for everyone involved. 

Russ: Any last comments you would like to make about Streamlined and the outstanding work being done by your member states in partnership with the business community and CSPs? 

Craig: I want to thank you for having this conversation with us. Streamlined has developed into a unique partnership between our member states, the business community and the CSPs, and has resulted in significant benefits to all the parties involved. Sales tax compliance is much easier now in the member states than it was prior to those states adopting the Streamlined requirements. The Streamlined Sales and Use Tax Agreement has really become the gold standard for simplification and uniformity in sales tax administration. But our work is not done. As goods, services, technologies, and selling platforms continue to evolve, we will seek additional opportunities to make sales and use tax compliance as simple as possible.