Frequently Asked Questions
Why should states implement a Certified Service Provider framework?
In the wake of South Dakota v. Wayfair, states have authority to require all sellers, even those without physical presence, to collect sales taxes. But the Supreme Court made clear states are prohibited from imposing an undue burden on remote sellers. The Supreme Court explicitly recognized the importance of Certified Service Providers (CSPs) in sales tax administration, identifying three key elements of a constitutional sales tax regime as applied to remote sellers, including “provid[ing] sellers access to sales tax administration software paid for by the State.”
What is a Certified Service Provider and what services do they provide?
CSPs serve as trusted intermediaries, helping to facilitate the prompt and accurate collection and payment of sales tax from retailers across countless jurisdictions. CSPs provide a full suite of tools to allow sellers to easily and efficiently comply with a state’s sales tax code. CSPs ensure compliance at every stage of the sales tax process: from identifying the appropriate taxing jurisdiction, to automatically applying any appropriate exemptions, to seamlessly collecting and remitting the owed tax, to retaining documents for audit purposes.
What are the benefits of allowing CSPs to operate in a state?
CSPs provide a number of benefits to both state tax authorities and sellers. CSPs generate incremental revenue by enhancing voluntary compliance with sales tax collection and remittance. CSPs create a single, professional point of contact between states and sellers, reducing state administrative costs and freeing up scarce government resources for more efficient use. This simplified compliance process also allows sellers to focus on bringing their products to market rather than the sales tax rules of every state where they have customers.
What policy changes are needed for CSPs to operate in a state?
State lawmakers can create the policy apparatus needed for CSPs to operate efficiently with the following five legislative changes:
Give state taxing entities the authority to establish standards for CSP certification.
Require agency heads to maintain a database of tax jurisdictional boundaries and rates.
Establish minimum standards for certification, including: contract responsibilities, taxpayer confidentiality
requirements, and compensation guidelines.Provide liability relief for CSPs and sellers when relying on state-provided data.
Exempt a remote seller’s registration from any determination of taxation nexus.
How large is the CSP market?
The National Association of Certified Service Providers represents six business entities in the software provider market, who collectively have worked with thousands of multichannel merchants and processed millions of transactions.
Are CSPs reliable?
Absolutely. For more than five years, Certified Service Providers have been working with the Governing Board of the Streamlined Sales and Use Tax Agreement (SSUTA) to provide a user-friendly compliance systems for thousands of sellers in the SSUTA’s 24 member states.
How are CSPs compensated for their services?
Similar to how states compensate retailers for collecting the sales tax with a vendor allowance, CSPs are typically paid as a percentage of tax remitted and usually only for retailers without a physical presence in a state. Some CSP services are charged directly to the seller, but these are designed to fit into any seller’s budget.
How can CSPs bring additional revenue to my state?
Ecommerce is expected to grow to $693.4 billion in 2019. By facilitating seller compliance with state sales tax laws, CSPs ensure that legally due and payable sales taxes are correctly calculated and collected at time the transaction is completed, with timely remittance of collected taxes to the state.