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California: Relying on Zip Codes for Sales Tax Causes Confusion


 Relying on zip codes to find sales tax rates doesn't work.

There’s a new shopping center on the outskirts of Bakersfield, California. Outlets at Tejon, located at the junction of Interstate 5 and Highway 99, is home to more than 300,000 square-feet of retail shops and restaurants. Among other items, shops feature name brand clothing, jewelry and kitchenware. Oh, and more than one sales tax rate.

It is not unusual for an area the size of Outlets at Tejon to have more than one sales tax rate. Indeed, there can be more than one rate in one city block, and one zip code can have several sales tax rates. However, in actuality, all the stores at Outlets at Tejon should be charging the same rate of sales tax: the 7.5% rate that applies to unincorporated Kern County.

Oops.

Approximately 10 stores are mistakenly charging the 8.5% rate in effect in much of the City of Arvin. The postal address for Outlets at Tejon has an Arvin zip code, 93203.

According to Barry Zoeller, vice president of corporate communications and marketing for the Tejon Ranch Co., all the stores were informed of the proper rate prior to the opening of Outlets at Tejon. However, the computer systems used by some of the national retailers located in the facility “picked up the center’s Arvin zip code, and those stores are collecting the Arvin city sales tax rate of 8.5%” (Bakersfieldnow.com).

This is a cautionary tale that perfectly illustrates why businesses should not rely on zip codes to determine sales tax rates.

Automated sales tax software assigns the right rate to all transactions. Learn more.

photo credit: ktpupp via photopin cc


Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.