US sales tax by state, county, city and district
Invoices, quotations and sales orders work out US sales tax from the ship-to address — only where the company is registered, not for a customer with a certificate in date, and not on what the state does not tax — and keep the tax jurisdiction by jurisdiction.
One sale in the United States can carry three or four taxes at once — the state’s, the county’s, the city’s and a special district’s — each owed to a different authority and each reported on its own line of the return. TRANXACT works them out from the address the goods go to, and keeps each one apart so the return can say which part went where.
Nothing changes for a company with no active US sales tax registration, a company under ZATCA, or an Indian GST company: their documents are taxed exactly as before.
Where you collect: registrations
You collect sales tax only in a state where you have an obligation to — where you have nexus and have registered. Record each one under Accounting → Close & Compliance → Registrations & Returns → Tax Registrations (in CRM until 12 October): the state’s jurisdiction, Tax set to sales tax, the registration number, Why there is an obligation (a place of business, staff, stock, or sales over the state’s threshold — Revenue threshold and Transaction threshold, Measured over so many months), how often you file, and Status active.
In a state where you are not registered, a sale is shown with no tax and the reason “Not registered to collect sales tax in …”. In a state that levies no general sales tax (untick Levies a general sales tax on its Tax Jurisdiction — Oregon, Delaware, Montana, New Hampshire) nothing is charged whatever is registered.
From the address to the jurisdictions
- The address. The ship-to given on the document, or else the customer’s ship-to site. The state is read as its two-letter code, the ZIP as five digits with the ZIP+4 extension apart, and the county without the word “County”.
- Sourcing. Destination — where the goods are delivered — unless the state says otherwise. On the state’s Tax Jurisdiction, Sourcing (in-state sales) can be Destination, Origin (where the seller is: Texas, Arizona), or Origin, but districts at destination (California’s split). A sale from one state into another is always taxed at the destination.
- The jurisdictions. The state by its code; the county, the city and any special districts from the Jurisdiction Zones — a county or city name, a ZIP range or a ZIP+4 range — and each zone’s parents up to the state.
- Whether to charge: not where you are not registered, not to a customer holding an exemption certificate in date, and not on an item the state does not tax (Taxability Rules).
- The rates. Each jurisdiction’s own tax code and its rate in force on the document date, from Tax Rates. The tax is worked out and rounded jurisdiction by jurisdiction, then added up for the line.
A delivery to an address in Chicago, for example, carries the Illinois state rate, the Cook County rate, the City of Chicago rate and the Regional Transportation Authority rate — four lines on the return. The rates in this example and in any shipped table are for illustration: check them against each state’s published rates before you rely on them.
Some zones cover only part of a ZIP code (Covers only part of the postcode, on Jurisdiction Zones). A ZIP alone cannot decide those, so the answer says so — give the ZIP+4, the city or the county and it is decided; it is never guessed.
What a state does not tax: taxability rules
Accounting → Tax → Taxability Rules says how a kind of item (its Tax classification) is treated in a jurisdiction:
| Field | What it does |
|---|---|
| Treatment | Exempt (no tax here on this kind of item, such as groceries in Texas), Reduced (taxed at the Reduced rate (%) instead), or Taxable (taxed in full — useful to undo a parent’s exemption). |
| Only below this unit price | For thresholds such as clothing under a set price per item: at or above it, the exemption does not apply. |
| Applies to the counties, cities and districts beneath | A state’s rule reaches down to the local taxes beneath it unless a county, city or district has a rule of its own. |
| Valid from / Valid to | So a change in the law is a new row, and an older invoice keeps the treatment of its date. |
Exemption certificates
A customer who buys for resale, a charity, a government body and the like gives you a certificate. Record it under Accounting → Tax → Exemption Certificates with the customer, the jurisdiction, the type and the dates. While it is in date, nothing is charged to that customer in that jurisdiction and everything beneath it; a certificate with no jurisdiction covers them all. The line detail shows “Exempt: resale certificate …” in place of the tax.
A certificate that has expired is not applied, and the document says so: “exemption certificate(s) for this customer expired on or before … and were not applied”. The Days left and Expiring columns on the list are there so that does not happen.
On the document
- AR invoices, quotations and sales orders: a line that carries no tax of its own is taxed this way when it is saved.
- A line that carries its own tax keeps it — an explicit tax, including an explicit zero, is never overwritten. That is how you put an agreed amount on a line, or a tax a customer has settled with the state directly.
- Accounting → Tax → Line Tax Detail keeps every line’s tax jurisdiction by jurisdiction: the state, the level, the jurisdiction, the tax code, how it was sourced, the outcome (taxed, reduced, exempt by certificate, not taxable, not registered, no sales tax, no rate), the rate, the taxable and exempt amounts and the tax. It is what a return reads by state, county, city and district.
- Accounting → Tax → Tax Determination’s Test determination takes a ship-to state, city and ZIP (ZIP+4 allowed) and a tax classification, and gives the same answer before any document is raised.
A tax code with no rate in force on the document date charges nothing for that jurisdiction and warns, naming the code — add the rate under Tax Rates rather than typing the tax.