What to Know about Sales Tax Rate?

What to Know about Sales Tax Rate?

If you are worried about calculating your sales tax, it is not an issue now because you can easily do it in moments. We are long past the time where we needed to manually calculate our sales tax and other taxes and file them all down to our respective state. Everything has become digital and so has the calculation and the filing of taxes been. If you need to calculate your sales tax now all you need is a sales tax calculator, you can also try out one of the sales tax online and calculate it in moments before submitting it.

Working with this Sales tax calculator

If you are planning to switch to a sales tax calculator online or a premium calculator you can get, then when you enter the street address, you should keep in mind that the calculator will switch on the geolocation to find out the exact tax jurisdiction. In this way, the determination of the corresponding sales tax rate would also become really easy!

Sales Tax Calculation by Zip Code


If you are thinking of going for a sales tax calculation on the basis of the ZIP codes, then it isn’t the right way to do it. The Zip codes were created primarily in order to help the U.S. Postal Service for the appropriate delivery of mail and are also independent of any state revenue systems. Besides, if you do that you can perhaps get it entirely wrong because the boundaries can change and would most often don’t satisfy the tax rate jurisdictions. Therefore, you should avoid using zip codes to determine the rate of sales tax around the US.

And if you do that, you risk applying incorrect sales tax rates and remitting tax to the incorrect jurisdiction. Furthermore, if you continue with these kinds of errors you will risk your company to be subjected to audit penalties, fines, and fees.

What to Know about Sales Tax Rate?

Sales tax is a certain amount of money that we have to give to the government or the governing body of a state in order to run our sales business inside the country. We have a sales tax imposed on forty-five states along with the Washington D.C. Sales tax is one such tax that is governed at the state level. This means that each state can set its own rules and laws in case of its sales tax. Also, it is important to know that there is no such thing as a “national” or “federal” sales tax.

How does the rate of sales tax vary?

The rates of sales tax depending on a list of factors like which state it is, the economic condition of the state and many more:

How are the rates of a state determined?

You should know that each state with a sales tax has its individual statewide sales tax rate. These taxes are used by a state to pay for the roads and to ensure public safety. The state sales tax rate is the rate that the state charges on the tangible personal property across the state, which sometimes also include the services, provided inside the state. This sales tax rate is usually fixed between 4-7%. Therefore, you can take, for example, the state tax rate of New York which is 4%, but the state sales tax rate in Tennessee is fixed at 7%.

Also in some states, if you notice, the sales tax rate stops there. There are ten states in total which don’t have any local tax rate. Therefore, it is important to note that if you make a sale to a buyer in one of those states like Michigan, then you’d just charge them the Michigan state sales tax rate of 6%.

Local rates

In the case of the other states, you must know that they also allow the local areas like the counties and cities to decide on the sales tax rate. In this case, you may collect a state sales tax rate, along with a percentage as decided by the county or city. Lastly, there are also special taxing district rates where the states hold the power to decide on a certain amount of sales tax to be levied against the goods and services that are dealt from within that state.


Author Since: June 29, 2020

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