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Tracking Sales Tax Rates Across Thousands of Jurisdictions

  • Jun 25, 2015 | Jaimy Ford

Old Ben Franklin wasn’t joking when he uttered “In this world nothing can be said to be certain, except death and taxes."

If you want to avoid trouble with state and local tax authorities, you have to pay taxes on just about everything short of air, and, if you're a seller, you have to ensure your customers pay sales tax on a wide array of purchases--both products and services--they buy from you.

As if all that wasn't enough of a burden, in the United States, sales tax rates vary dramatically from state to state, city to city, county to county, and sometimes even street to street (we're looking at you, Denver). Tracking tax rates by location is a very complex task. Fortunately, that's our specialty! Let's chat about how this can be easier for sellers like yourself.

Complexities to make your head spin

As we just mentioned, sales taxes rates vary from location to location. Some cities (we’re looking at you St. Louis) even have multiple sales tax rates within city limits.

On top of that, sales tax rates change, sometimes as often as quarterly. Once you have all that sorted out, you still have to factor in tax holidays and sales tax exemptions many of your customers are entitled to, all of which vary from state to state as well.

In short, sellers have to contend with thousands of jurisdictions with rates that could fluctuate throughout the year--if the tax is even applicable.

But fail to charge the correct sales tax and you could be hit with costly penalties and interest fees, or you could even be audited. Plus, your customers might not appreciate being overcharged. In short, the maintaining sales tax compliance is something you shouldn’t take lightly.

What's a business owner to do?

Sales tax rates will almost always be driven by the ship-to location or destination of the service or product you are selling. If you are selling products or offering your services in the 45 states (plus Washington DC) that collect sales tax, you must apply the sales tax rate for each location to which you ship a product or in which you provide your services.

If you're new to online selling (or the power of technology), you might think you'll need to hire someone to manage all this tax rate confusion. There was a time not too long ago that would have been true and it still is if you're manually entering rates into a point of sale system. The good news is, with a service like TaxRates.com you can get all the rates your heart desires for free.

There must be a better way

Downloading tax rate tables is certainly a dramatic improvement compared to visiting multiple state government websites searching for rates. Plus, the risk of errors is very high as you aim to capture the correct rate type for the correct location. Still, it is a necessary evil if you want to remain compliant with federal and state tax laws.

Or is it? Instead, you can let technology come to your rescue. Avalara’s AvaTax integrates with your current software to deliver instantaneous real-time sales tax decisions of more than 12,000 U.S. taxing jurisdictions. The rates are automatically applied to each transaction.

You don’t need to track rates or changes ever. The software does it for you, saving you tons of time, peace of mind, and ultimately, money.

AvaTax is a scalable, subscription-based Software-as-a-Service (SaaS) that is tailored to meet your specific needs. Learn more.

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.
Avalara Author
Jaimy Ford
Avalara Author Jaimy Ford