Automatic Sales Tax Tables

Question

A client needs the ability for their shopping cart to automatically retrieve and keep up to date sales tax tables for at least the US, and preferably all countries with which the US has tax treaties. Is this a reasonable requirement? Hosted solutions are fine.

Answer 1

I sure it is of use to the client. That's wat matters in this case.

You should have a separate table for the tax with a link to the transaction that generated it. The transaction table will also be able to help you get to the country where this transaction occured.

Answer 2

I wouldn't call it a "reasonable" requirement, but it's do-able. Find the appropriate government site(s) or sites consolidating them and write some screen-scraping code. Poll the sites, say, hourly for changes.

Answer 3

There are large amounts of dollars being made on keeping databases up-to-date with US sales and use tax for on-line retailers, mobile phone companies, etc. There are subscription services as well (I wrote some of the products a few years back for one of the larger companies). They offered bi-monthy, monthly, quarterly, semi-annual, and annual updates (at rates compatible with the frequency, of course).

One such place to check is here. I have no idea what their current fees are like, though.

Answer 4

One option may be to not collect sales tax at all. Online retailers like Amazon and NewEgg don't. Of course, check first with an accountant and/or tax lawyer to see if that's legal.

I strongly recommend against building your own sales tax system. The complexities are enormous:

• In the U.S., sales taxes are handled by almost every government jurisdiction. To build a database of sales tax data, you would have to know the applicable laws for every state, some counties and cities, and "special" taxing districts established for things like libraries, sports stadiums and public transportation systems.

• You would have to update this database on a daily basis, since any one of those jurisdictions can enact, modify or repeal taxing regulations at any time.

• You would have to figure out the "triangulation" rules for all of those jurisdictions. Say I live in Arizona and purchase something online from Colorado. I have the item shipped from Colorado to Texas. Which jurisdiction gets the sales tax? The answer depends on the tax laws of all three states, which may contradict one another.

• If you collect sales tax for a given jurisdiction and remit it to them, you can be subject to a tax audit by that jurisdiction. Given all of the complexities listed above, if you built your own sales tax database, would you trust it in the context of a tax audit?

I recently worked with a client that purchased both the iVAT (for Europe) and Vertex (for U.S.) sales tax systems. Integrating them into my client's products emphasized how complex the whole process is, and how nice it is to have a third-party do the work for you. Europe's various VAT tax systems are simple compared to the U.S. system. In the U.S., many locations have more than one applicable sales tax. There are some places in California that have five!

In short, don't collect tax if you don't absolutely have to. Otherwise, buy - don't build.