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# SST Best Practices for How to Round Sales Tax

• January 21, 2015 | Ryan O'Donnell

If you're a small business owner in the United States, you're required to collect sales tax on behalf of your customers in states where you have nexus. Although most states that collect sales tax have rates set at an even percentage, some states impose sales tax at an uneven rate. This results in the question, "What do I do if the calculated sales tax amounts to a fraction of a cent?"

In this post, we will explore sales tax rounding best practices as outlined by the Streamlined Sales Tax (SST) Organization.

## Permission to Round

Because many states set their sales tax rates at uneven percentages, the amount of sales tax owed might not compute to an even penny. When this occurs, state taxation authorities permit the retailer to round the sales tax to the nearest penny.

For a seller, sales tax computation can seem complicated, especially with hundreds of rates across the United States, but following a simple method recommended by the SST can simplify things. Here are three best practices for rounding sales tax.

The SST recommends states round up for anything 0.5 and over and round down for anything below 0.5. This makes it acceptable for consumers who might otherwise feel that the state is being enriched at their expense.

## Getting to the Point

To further complicate things, not all states employ the same best practices. Different states employ different rules for how far sellers are required to carry out the decimal places in determining the tax due. One state carries out to one decimal place, one state carries out two decimal places, 14 states carry out to three decimal places, one carries out to four places, and one state carries out to six decimal places. To avoid confusion, the SST recommends carrying out to three decimal places, based on common country-wide best practices.

## Its Up to You

Finally, the SST recommends the decision regarding whether to tax items separately or in total in an invoice be left to the seller, as long as the decision is consistently followed. Since this calls for arithmetic rounding, any differences caused by sellers using different approaches  should be insignificant.

It's important to keep in mind that state and local tax rates change frequently. Regardless of the methods you chose to employ when rounding sales tax collections, its important to stay up to date on recent rate table changes and up-to-date best practices. Use our free tax rate lookup tool to get up to date tax rates by zip code or address.

Avalara Author
Ryan O'Donnell
Avalara Author Ryan O'Donnell