Why AI not backed by tax expertise can get sales tax rates wrong

A growing number of businesses are discovering how ChatGPT and similar artificial intelligence tools can streamline innumerable tasks. But when it comes to tax compliance, it’s best for businesses to rely on purpose-built tax solutions backed by human research expertise.

• AI alone does not guarantee accurate sales tax rates or rules. A third-party large language model misapplied a sales tax rate because it didn’t account for effective dates. 
• Purpose-built tax solutions provide more accurate tax results. Avalara uses vetted tax content and expert validation to identify sales tax rates.
• Expert-backed tax solutions reduce compliance risk. Avalara Agentic Tax and Compliance™ combines AI with deep tax content and human expertise to help ensure greater accuracy.

When a search for a sales tax rate put Avalara AvaTax and large language model (LLM) AI chatbots like ChatGPT, Google Gemini, and Microsoft Copilot to the test, Avalara came out on top.

In October 2025, a third party AI chatbot told a user the combined sales tax rate in Bellevue, Washington, was 10.3%. According to Avalara AvaTax, the combined sales tax rate for Bellevue in October 2025 was 10.2%.

Which tool was right? 

Avalara AvaTax gave the correct rate. The sales tax rate for Bellevue was 10.2% in October 2025. The rate will increase to 10.3%, but not until January 1, 2026. 

David Lingerfelt, Senior Director of Indirect Tax at Avalara, explains the discrepancy: “In July 2025, King County, Washington, passed an ordinance to impose an additional 0.1% sales tax to fund safety. However, the tax doesn’t take effect until January 1, 2026. The LLM chatbot was unable to distinguish between the ordinance enactment date and the effective date of the tax.”

Lingerfelt says his team has observed similar issues with other LLMs.

Avalara AvaTax is an AI-powered compliance platform. What makes Avalara stand apart from more generic LLMs is that it’s built on more than 20 years of vetted tax content and it’s supported by human expertise. 

“What happened with the Bellevue sales tax rate is a good example of why Avalara customers trust our research expertise and products,” observes Vsu Subramanian, SVP of Engineering at Avalara. “AI can misinterpret information confidently sometimes. That’s why we have experts review and refine AI-generated outputs to ensure accuracy and reliability.” 

Vsu adds that Avalara Tax Research can answer complex tax questions backed by our tax expertise and technology. “Avalara Tax Research is trusted by leading Fortune 500 companies and accounting firms for trusted and accurate tax answers,” he says. 

With the launch of Avalara Agentic Tax and Compliance™, which embeds AI agents directly into compliance systems, tools, and workflows, Avalara provides a new level of efficiency and expertise. Our comprehensive, continually updated tax content stands behind the agent, ensuring every action is expert-verified. 

Ready to trust your tax rates to a purpose-built tax solution using expert-backed AI? Discover the benefits of Avalara Agentic Tax and Compliance™.

Why can general purpose LLMs like Google AI, ChatGPT etc. get sales tax rates wrong? 

LLMs that aren’t purpose-built tax solutions can misread tax laws or miss effective dates. Without expert validation, they may apply outdated or future rates incorrectly. Tax rules and applicability can be quite complicated too. 

How did Avalara outperform an AI chatbot in sales tax accuracy? 

In a real scenario, Avalara identified the correct 10.2% Bellevue sales tax rate for October 2025, while a leading LLM based chatbot used the upcoming 2026 rate. The expert-backed tax content provided by Avalara AvaTax supported accurate results.

What is Avalara Agentic Tax and Compliance™? 

Avalara Agentic Tax and Compliance™ combines AI-driven automation with verified tax content and human expertise to help ensure accurate and compliant results.