With every new year, tax season quickly approaches. Rates change all the time across the United States and Canada. Every month brings new tax rates across cities, counties, states, provinces, and even smaller local districts. There are even more changes each quarter, with January bringing the most tax rate changes of them all.
In addition to new tax rates, boundaries and borders are constantly changing. New ZIP codes are formed, and boundaries of ZIP codes, cities, and counties change monthly. All of these changes can wreak havoc on retailers and businesses who must calculate, collect, and disperse sales and use taxes. An address that was in one jurisdiction on one day could be in another the next day — and it’s your responsibility to calculate and collect the correct taxes despite all of these changes.
With myriad local, state, and provincial sales and use tax jurisdictions, applying the correct tax rates is challenging for businesses of all sizes. It’s virtually impossible for the average business to keep on top of ever-changing tax rates affecting them and their customers without some sort of assistance. For companies that do business across the United States and Canada, sales tax software is an absolute must due to the sheer volume of tax jurisdictions involved and the constant changes. Even small businesses can benefit from a sales tax API as local sales tax rates can fluctuate from one city to the next — and even within a given city if special districts have been created.
First, it’s not just about getting the most current sales tax rates each year, quarter, or month. It’s important to have a system that is collecting the most current address data as least once a month. Even if your customers do not move, their ZIP codes may have changed, or a new special district may have been formed in their area. By having the most accurate address information for your customers, you will be better able to comply with sales and use tax requirements. Not only does our address validation service validate your address data, we are constantly updating our database to reflect the latest tax changes including ZIP code, boundary, and rate changes.
The team at Service Objects anticipates these changes each month and quarter. We knew January would bring a host of changes, as the new year always does. We worked extremely hard incorporating the new changes for January 2016 into our system. 15 different states — Alabama, Arkansas, Arizona, California, Colorado, Georgia, Florida, Illinois, Montana, Minnesota, New Mexico, Ohio, Oklahoma, Nevada, and South Dakota — had new tax rates. In all, over 350 cities and over 60 counties across the United States had new rates. This could mean that hundreds of thousands, perhaps even millions, of addresses now have new tax rates.
If you don’t have sales tax software or current, validated addresses, how will you know if you’re applying and collecting the correct rates? The short answer, you won’t know.