The five steps for managing sales tax

Step 3: Calculate the correct sales tax amount

Overview

Once you register with the tax jurisdictions, you’re ready to start calculating and collecting sales tax. With more than 13,000 tax jurisdictions in the U.S. — each having unique tax rates and product taxability rules — it can be difficult to know the correct tax rate to charge. But, it’s crucial you get it right so you aren’t under-collecting for the tax authority, or over-collecting causing unhappy customers.

What to do:

Ensure you understand the variables of a tax rate, such as tax jurisdiction rules and product taxability for what you’re selling. From there, have a plan in place to quickly and accurately apply the tax rates to every transaction.

Determining the taxability of the products you sell

Not all products are taxed the same way across tax jurisdictions, so it’s important to understand how taxability can impact various tax rates. Some taxability rules, such as those for software, are uniquely complex. 

Understanding geolocation and its impact on tax calculations

ZIP code-based calculations don’t go the distance when determining appropriate tax rates across tax jurisdictions. Learn how geolocation technology helps ensure the most accurate rate possible.

Let Avalara help:

If you don’t already have Avalara AvaTax working behind the scenes, you’re missing out on automated sales tax calculations — in real time. Get tax rates at the time of sale, based on geolocation and product taxability. With automated sales tax calculations taken care of, move on to address exempt sales in Step 4.

Next steps

The five steps for managing sales tax
REMEMBER THE FIVE STEPS

Keep this checklist handy to remember these critical steps