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.
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