Streamlined Sales and Use Tax Agreement – Certificate of Exemption

The Sales and Use Tax Simplification Project (SSTP) is the multi-state simplification mechanism for different laws related to Sales Tax. This document became effective in September 2005 after 44 states, cities, localities, and business owners agreed to establish an easier way to pay the tax. 

Simplifying tax payments eases retailers’ tax burdens and streamlines the process. Currently, 23 states are part of this agreement, but the rest of the territories can be part of the compact if they meet the requirements established by the rules.

What is the Streamlined Sales and Use Tax Agreement made up of?

The simplified agreement has laws that revolve around four main points that allow for streamlining state and local tax codes. These are as follows: 

State-level administration

With simplified administration at the state level, retailers file a single tax return with one state agency, thus avoiding multiple receiving agents in each locality.

Uniform tax base

As with the previous segment, the agreement establishes a single tax base for taxpayers throughout the state. This means that goods and services are taxed or exempted from taxation under the same conditions throughout the territory. However, each state retains the autonomy to determine which product or service is eligible for payment.

Simplified tax rates

With this renewal, the same tax rate will apply in all tax jurisdictions within the same state. This rule allows for exceptions for certain foods and drugs.

Uniform Sales Sourcing Rules

To comply with the uniform sales sourcing rules within the state, the seller is expected to collect the tax rate that applies to the territory. In short, this is known as “origin sourcing.” When selling to a customer in another state, the merchant will collect the rate set in the destination territory, so this process is defined as “destination sourcing.”

What states are part of SST?

As previously mentioned, there are 23 member states. To be part of this agreement, the state must meet certain requirements and be placed in three levels of participation in the project: Full Membership, Contingent Membership, and Consultative States.

  • Contingent Membership: A state acquires this title when it complies with all of the agreement’s bylaws. It has full voting rights on the board. The only one currently in this category is Tennessee.
  • Consultative status: States acquire this title through state-by-state enabling legislation. They have full project rights, have voting rights on proposals agreed to by the SLAC, and participate in various working groups. Although they work with the Governing Board, they do not have voting rights on the Governing Board.

Member states

The member states of the agreement apply the simplification pact with a certificate of compliance. Currently, these are the states that meet all of the requirements in effect:

  1. Arkansas
  2. Georgia
  3. Indiana
  4. Iowa
  5. Kansas
  6. Kentucky
  7. Michigan
  8. Minnesota
  9. Nebraska
  10. Nevada
  11. New Jersey
  12. North Carolina
  13. North Dakota
  14. Ohio
  15. Oklahoma
  16. Pennsylvania
  17. Rhode Island
  18. South Dakota
  19. Utah
  20. Vermont
  21. Washington
  22. West Virginia
  23. Wisconsin
  24. Wyoming

Streamlined Sales and Use Tax Agreement Certificate of Exemption

The Certificate of exemption is a multi-state form that applies to all member states. Each state has products exempted from this tax according to its criteria; that is to say, in each territory, the exempted products vary—Check in your city of residence which products or services are exempt.

The buyer is responsible for paying any tax or interest and any possible civil and criminal penalties imposed by the state. However, if the state is the purchaser, you are not entitled to claim exemptions. 

Complete the Certificate

After downloading the Certificate, we show you the basic steps to complete the document. The form is composed of one page and six parts that you must complete as follows:

Section One: Single Purchase Exemption Certificate

You only check this box if it is a one-time purchase. It is necessary to complete the invoice number or purchase order number. If the taxpayer does not check this box, the form will be treated as a general form.

Section two: Buyer and Seller Information

Only check this box if it is a one-time purchase. It is necessary to complete the invoice number or purchase order number. If the taxpayer does not check this box, the form will be treated as a general form.

Section two: Buyer and Seller Information

This form segment contains the buyer and seller information, such as first name, last name, and complete address: state, city, country, and zip code.

Section three: Type of Business

Check the box that best describes your business, company, or organization. If your business does not match any of the descriptions, then check the “other” box and clearly define what activity your business relates to.

Section Four: Reason for Exemption

This section shows some of the most common exemptions in all states. It is important to remember that not all states have the same exemptions. Buyers should check each state’s website to determine which products are exempt from this tax.

Section five: identification number

This is the largest segment of the form where you must describe the ID number required on the exemptions representing each state. You may complete a single document for multiple states where the business activity is established or where the exempt products are purchased.

Section six: signature

Complete the document with your name, title, signature, and date of delivery of the paper to the seller. In the case of an electronic record, a signature is not required.

You are exempt from Sales and Use Tax commitments if you meet the following requirements:

  • The buyer complies with all the certificate fields and delivers it to the seller at the moment of the sale or in the next 90 days.
  • The buyer does not apply the completed exemption certificate to claim an exemption based on an entity not allowed by the state.
  • Does not fraudulently fail to collect the tax owed.
  • Does not ask customers to claim an exemption illegally.