Tax Calculation for US Sales Tax

Tax calculation for
US sales tax

Automated real time US sales tax calculations for online transactions

Any business selling into the US must comply with sales tax in the same way as a US business selling across state borders. With every state and some districts and cities setting their own rules and rates, this makes tax compliance quite complex. Integrating directly into your online sales journey, Taxamo Advantage gives you a head start by automating US sales tax calculations and providing detailed data for reporting.

Sales tax for Foreign Suppliers

Understanding where you are liable for sales tax can be a complex process in itself, with liability depending on whether you have ‘nexus’ in a state. Nexus can be triggered by either physical or economic activity in the state - and even overseas sellers can find themselves bound by physical nexus rules.

Tax calculations for US sales tax include:

Establishing Nexus

Establishing if you have nexus

US Customer Location

US Customer location determination

Tax exemption support

Tax exemption certificate support

Establishing Nexus

Establishing if you have nexus

You might expect physical nexus as determined by ‘substantial physical presence’ to apply only to in-state sellers. Yet remote sellers (including foreign suppliers) selling online can also find they have physical nexus.

Step one in understanding your sales tax nexus status is to look at physical nexus. Depending on the state’s individual rules, anything from installing cookies on a customer’s PC to attending a trade show can be enough to give you physical nexus.

Step two is to consider economic nexus. In states where economic nexus applies, you become liable for sales tax as soon you reach the relevant state’s economic nexus threshold. This threshold can be either a sales revenue value and/or a number of transactions (and can in either case be zero - making you liable from your first sale).

US Customer Location

US Customer location determination

To calculate sales taxes accurately, Taxamo Advantage identifies customer location in real time at point of sale.

In the United States tax rates are typically applied at a ZIP code level. In many cases, this will mean that the 5-digit US zip code is used along with the product taxability code to determine the sales tax rate for a given transaction. In cases where a business may want to establish a more precise address identification for sales tax purposes, ZIP+4 codes or address validation can be used to achieve this.

Taxamo Advantage offers sales tax functionality to:

  • US sales tax calculation at point of sale
  • ZIP+4 determination
  • Address validation
Tax exemption support

Tax exemption certificate support

Some US businesses are exempt from paying sales tax and prove this using a state issued tax exemption certificate.

Taxamo Advantage allows you to:

  • Capture exemption certificate numbers
  • Apply zero rate to tax exempt sales
  • Report on tax-exempt sales

Add-on compliance services

As a Taxamo Advantage client, you can avail of further compliance services to help you register, file, and remit tax where you have a tax obligation. Our expert hands-on compliance services offer end-to-end VAT, GST and US sales tax management.

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