Calculating and paying sales tax is a major challenge for small businesses. The rules for calculating your tax liabilities are different in every state. You not only have to calculate sales tax correctly, you have to charge your customers the proper taxes on their purchases and then send in the payments to the state treasurer. In addition to that, you also have to maintain tax records in case the state decides to audit you.
Sales tax automation apps can do all of these things automatically for you, but you normally have to pay subscription fees to use them. If your business qualifies for a specific subsidy, though, the state will pay for your subscription to the sales tax automation software. And if you’re operating an online business that has customers throughout the United States, there’s even a platform available where you can sign up for subsidized sales tax automation services in multiple states. So it is possible to get a sales tax automation app for free.
The Streamlined Sales Tax Governing Board
The Streamlined Sales Tax Governing Board is a private organization that helps online stores calculate and file their sales taxes. It has partnerships with 23 state governments. The purpose of this organization is to streamline the sales tax calculation and reporting process for merchants. State governments support this goal, so they’re willing to pay for sales tax automation software for merchants who do business in their states.
This board also has partnerships with sales tax automation providers. Right now, only four companies have partnerships with the board. They include Accurate Tax, Avalara, TaxCloud, and Sovos. Other platforms provide sales tax automation services as well, but they don’t have the SSTGB partnerships that make it possible to provide their software for free.
To qualify for the free sales tax automation service, you have to sign up for an account on the SSTGB website and select one of these apps. Otherwise, the state governments won’t subsidize your sales tax automation software. Note that this offer only applies to states where the SSTGB has partnerships. If a state government doesn’t offer a subsidy through the SSTGB then you’ll still have to pay fees to use sales tax automation software for that state.
This Subsidy Is Meant for New Entrants to a State
Your store has to satisfy several conditions to qualify for free sales tax automation software. These conditions apply to each state individually, not your business as a whole. This service is meant for businesses that are entering new states and preparing to collect sales taxes in those states. It’s not designed to subsidize businesses that have already established significant operations in a state.
For example, you might be thinking of expanding your business into Ohio and wondering if you’d qualify for subsidized sales tax automation software there. If you already have a retail store in Ohio, you only qualify for the subsidy if you’ve owned the store for less than 30 days. Additionally, you don’t qualify if your business owns more than $50,000 worth of property in Ohio or paid more than $50,000 to workers in Ohio during the past year. Because of these requirements, it’s unlikely that a brick-and-mortar store would qualify for the subsidy. Most eligible businesses will be online stores with headquarters in other states.
Other rules apply to your overall property holdings and the composition of your workforce. Your business needs to have 75 percent of its property located in other states, and 75 percent of its payroll must be paid to workers in other states. If either metric is above 25 percent for Ohio then your business doesn’t qualify for the subsidy. Additionally, if your business is already collecting sales and use taxes for Ohio so it can qualify to be considered conducting business there, it’s not eligible for the free service.
This program doesn’t include any other restrictions on the size of your business such as the value of its payroll or its total revenue. So a large business with extensive operations in its region could still qualify for subsidized sales tax automation software if if was expanding into a new state. You don’t have to be operating a small business to get this subsidy.
Registering in a New State
You can still qualify for a subsidy if your business is already operating in other states. For example, if your business is based in California and you want to register it in Ohio, you can use this platform to do that. California isn’t a member of the SSTGB. But if your business is registered in Kentucky, which is a SSTGB member, then you’d have to tell the platform that you were already registered in that state when you added a registration for Ohio. Otherwise, it might try to register your business in Ohio a second time.
Avalara charges $349 for registration in each state, so it would still be worthwhile to use the free service to register your business in a new location even if you’re already registered in a few states. Each state’s registration process works differently, but a sales tax automation app can fill out the proper forms and provide the required information in each state. So you’ll only have to submit business information to a single app to register your business for free in other states.
Registering your business through this platform is free. But if you’ve established nexus in a state already, that state may still charge you an additional fee to register your business.
Conclusion
If your online business is growing in a SSTGB member state and you’re coming closer to the threshold where you will have to register with state tax authorities there, consider signing up for this service because it will reduce your setup costs. You can not only register your business for free in a state, you can also obtain free sales tax calculation and remittance services for that state. While the app you select will still charge you for providing these services in other states, this program will still reduce the total cost of using a sales tax automation app.