SALES TAX AUTOMATED

COLLECTION

STAC
Media, Inc.

The inevitability of real time sales tax collection has been

acknowledged by national experts for many years

Yet, when virtually all commerce is transacted

electronically, there is no technical reason why sales
taxes cannot be transferred directly to the tax agency
at the close of the transaction. There will be all sorts of
barriers to that, political and otherwise, but none of them
will be technical. It will happen in our lifetimes, and the
cash flow implication for the states will ultimately make it
happen...When electronic commerce is ubiquitous, the
logic (and the dollars) of real time sales tax payment
will become a reality.
The Sales Tax in the 21st Century
Matthew Neal Murray, William
F. Fox Greenwood Publishing
Group, Jan 1, 1997

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1

Antiquated sales tax systems lead directly to the loss of

millions of dollars for states and local governments

Noncompliance resulting in significant sales tax

revenue leakage
New York has attributed $1.7 Billion form Sales Tax supression

Software
Floridas annual sales tax gap of taxes collected from
customers but not paid to the state is estimated to be as
much as $2 billion2

Scholars have estimated that in some corners of the

retail market only about half of sales are reported 3
resulting is sales tax losses in every state

Slow remittance of sales tax cash collected

materially negatively impacts state and local cash
generation and costs of doing business

Reduces the millions of dollars of interest float that

Sources:
Report of
the California
Board of Equalization,
Addressing the Tax Gap, Fiscal Years 2011-2012 Through 2013-2014,;
cash
on
handState
would
deliver

Final Report of the Miami-Dade County Grand Jury, Feb. 7, 2011, at page 27; 3Susan Morse, Stewart Karlinsky, and Joseph Bankman, 20
Stan. L. & Poly Rev. 37 (2009).
2

Increases debt
STAC required to satisfy
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burden costs as more borrowing is

operating cash flow needs

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2

UNNECESSARY BURDENS TO BUSINESSES

State imposed sanctions on

businesses are unnecessary
burdens for the merchant.
The system of forced
requirements are structured
in a way that encourages
small and mid sizer
merchants to become
delinquent

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3

What is STAC?

Sales Tax Automated Collection (STAC) is a

patented and the only sales tax payment
methodology that would enable the collection
of sales tax from credit and debit transactions
in real time.
STAC methodology uses existing payment
systems, technology, and infrastructure to
create an easy vehicle to remit daily credit
and debit sales tax transactions.
STAC methodology will require no change to
the current sales tax return filing processes.

STAC
Media, Inc.

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STAC methodology works with both types of Point-of-Sale

(POS) Systems
Stand-alone terminals
(aka countertop or nonintegrated)

Fully Integrated Point-of-Sale

(POS)

Processor

Software/Hardware examples: NCR, Toshiba,

Micros, Epicor

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Processor

Makes up 60% of the total number

of merchants. Examples: VeriFone,
Ingenico, Equinox (HyperCom)

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VeriFones POS Device already accepts sales tax data

today

75 % of New York
State merchants
use terminals like
this to process
CREDIT AND
DEBIT CARDE
sales

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Prompting for sales tax is a

core feature

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8

STAC methodology applied to the credit abd debit card

transaction and settlement process
PROCESSO
R
sends the
transaction
to a CARD
BRAND

CUSTOMER
makes a
purchase
with a
credit card

STORE
records
card
information
with Pointof- Sale
system and
transmits to
a
PROCESSOR

ISSUER
bills
CUSTOME
R on
their
monthly
statemen
t

CARD BRAND
submits the
transaction
to the
ISSUER

STORE accepts credit card as payment for

goods/services

ISSUER
receives
payment

ISSUER
pays the
CARD
BRAND
CARD
BRAND
pays the
PROCES
SOR

Who is involved in typical

transaction?
CUSTOMER makes a purchase with his/her credit card

CUSTOMER
pays bill
to ISSUER

PROCESSOR
pays sales
tax to the
STATE

STAC methodology enables

sales tax payment process to be
a real time automated process

PROCESSOR processes credit card sales for stores

CARD BRAND includes VISA, MasterCard, Discover,
American Express
ISSUER provides the card to the CUSTOMER and
maintains that account

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PROCESSOR
pays the
STORE sale
amount

STATE
receives
payment

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STAC patented methodology is straightforward and

leverages existing technology and payment process
infrastructure

Sta
rt
Purchases Input
into POS
Calculate
Sales Tax
Transaction Card
Tendered
Approval
Sought
Transaction
Closing
Transaction Added
to Sales
File

Send Sales
File for
Settlement

Separate Revenue
and Tax Portions of
Sales
Transactions(s)

Process at
Transaction
Card
Processor

Receive
Revenue
Payment at
Merchant
Account

US Patent numbers
8321281and 8583518

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Receive
Tax
Payment
at
Tax
Account
of
the
State

Processing
technology today
supports
Corporate
Purchasing Cards
which require the
processing and
reporting of sales
tax transaction
amounts.
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Antiquated sales tax collection system costs states millions

(and some billions) of dollars every year
1,4
00

FY2014 Estimated STAC Incremental State Sales Tax

Dollars by State 1

1,200

Millions of Incremental
Dollars

1,000
800
600
400
200
0
AK AL AR AZ CA CO CT DE FL GA HI IA

60-day Increase in Interest Float

3

60-day Accelerated Sales Tax Receivables

Total
Improved Compliance 4

0
1
0
0
0

17

11

ID

IL

IN KS KY LA MA MD ME MI MN MO MS MT NC ND NE NH NJ NM NV NY OH OK OR PA RI SC SD TN TX UT VA VT WA WI WV

13

WY

9 11 24 120 9 14 0 74 20 10 9 5 31 25 11 12 11 19 16 4 34 19 12 12 0 21 4 6 0 31 8 13 46 32 9 0 35 3 11 3 25 94 7 13 1 41 16 5
4
86 106 234 1,17 87 142 0 732 200 102 91 46 303 250 107 115 106 192 154 40 337 186 117 116 0 210 42 59 0 305 75 130 449 312 91 0 346 32 110 32 246 924 70 132 13 400 162 48 37
76 94 207 1,04 77 125 0 647 177 90 81 41 268 221 94 102 94 169 136 35 298 165 103 102 0 186 37 52 0 270 66 114 397 276 81 0 306 28 98 28 217 817 62 116 11 354 143 43 33

Sources: 1FY2014 enacted state sales tax revenue from The Fiscal Survey of States, Fall 2013 p. 43; 2Estimate based on additional 60 days of
compounded daily interest at 0.50% APR of 67% of sales tax revenue as 67% percent of all point-of-sales (POS) transactions are done with plastic and the
point of sale (POS) retail market makes up 93% of total U.S. retail dollar volume, Javelin Strategy & Research, 2012 and 2013; 3Estimate based on
reduced borrowing costs based on calculation from Collection Days Saved, Thousands Earned, Inc., November 1, 2000 using 60 days acceleration of 67%
of sales tax revenue and borrowing cost of 3.5% APR; 4Applied 5% noncompliance rate to 67% of sales tax revenue based on Evaluation Report of Tax
Compliance,
STAC Office of MN Legislative Auditor, March 2006.
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Implementing STAC methodology would benefit states and localities

Implementing STAC methodology would be another tool

in controlling and targeting new borrowing to keep
debt service affordable and ensuring that the state
abides by the debt limit

Implementing STAC methodology would improve cash

flow position by using existing technology to collect
sales tax in real time

Implementing STAC methodology would reduce sales

tax noncompliance by automating the cash collection
process

Implementing STAC methodology would

demonstrate leadership in tax innovation and
process optimization

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16

Current Sales Tax Systems Are Not Working And Broken

Antiquated and costly to administer

Imposes staggering and unnecessary burdens on

businesses

Structured in a way that essentially encourages

small and midsized retail businesses to become
delinquent

After-the-fact enforcement does little to prevent

noncompliance and it is often too much and too late

The increasing prevalence of tax amnesties over the

past decade has been shown to encourage
taxpayers to wait for the next amnesty rather than
perpetually engage in voluntary compliance with the
revenue system1

Source: 1Mikesell and Ross. September 2012. Fast Money: The Contribution of State Tax Amnesties to Public Revenue Systems. The National
Tax Journal, September 2012, 65 (3), 529 562.

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Background Overview

States are focused on continuing to apply discipline

and best practices to improve the budget and
financial condition of the state and its localities

States and their localities could benefit by gaining

significant incremental ongoing revenue without
raising tax rates by:
Improving sales tax collection efficiency to reduce
borrowing interest payments and to increase float
interest earned

Improving sales tax collection effectiveness to reduce

sales tax leakage due to underreporting, evasion,
errors, and business bankruptcies

Increasing data and reporting capabilities to

mitigate better overall revenue collection risk through
improved auditing and performance analysis

Sales Tax Automated Collection (STAC) methodology

STAC
would enable States to maximize these benefits byPage
Media, Inc.
20
st
moving its sales tax collection process into the 21

two year successful test of STAC

methodology

We have not seen any evidence from the 2 years of

testing and application of the STAC methodology that
it would impose additional burdens on merchants
especially small ones.

In fact, from our experience it appears that the STAC

methodology lessens the burden on the small business
owners as it reduces the 2-3 days a month spent
trying to determine the proper sales tax payments.

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