Computing California Sales Tax

Question

One of the web apps I'm working on has a fairly small web store / shopping cart. As the client company is physically located in CA and has a physical location there, they're required to collect CA sales tax on all orders shipped to locations in California.

For those who don't know, CA has some fairly complex sales tax rules where, essentially, any local group can create a "tax district" and leverage an extra few cents worth of sales tax on top of the state-wide base of 7.25%. (Usually less than 1% extra.) These districts don't have to map to any other legislative borders, so you can end up with half a city paying an extra .25% sales tax, for example.

Technically, the law only requires that you charge the sales tax rate in your location as a seller - so, if I have a store here in Sacramento, I only need to charge Sacramento sales taxes on all orders shipped.

However, for various accounting and tax declaration reasons, it's actually easier to charge the sales tax of the location the order is being shipped to. (Which means a different sales tax, potentially, on every single order.)

So - my question. Is anyone aware of any slick ways to calculate this? The data you need to actually do the work is all available in a variety of semi-useful formats at the state Board of Equalization website, and we're knocking together a widget that tries to figure out sales tax based on things like city name and zip code. But, I was wondering if anyone has come across any cool tools out there for solving this problem. (Or any tools at all, for that matter.)

(We're using VB and ASP.net, but I'd be interested in solutions for any language, mainly because I'm fascinated to see how other people have solved this.)

Addendum - answering some questions from below:

Tim asks how this can possibly be "easier." I'm told that doing sales tax this way makes filling out your tax return simpler. I'm bleary on the details, but as I understand it, if you don't charge the rate for the shipping location, you have to justify why you didn't for every single order at the end of the year - namely, you have to attest that no, we live here and not there, so we charge the rate here.

Whereas if you always charge the destination rate, you can (apparently) just put down the total amount of sales tax you collected for the whole year on one line, and say "sales tax was this much.

It would seem the state doesn't care which you do. So, by "easier," I really mean "easier for the accountants" - which is of course in no way easier for us here on the programming team.

Also, Schnapple's Texas story is a potential solution. (In fact, I pitched this very idea this morning.) CA really doesn't care if you overcharge sales tax, as long as you don't undercharge and hand over everything you collect. The problem here is, unlike Texas (apparently) vast swathes of CA are not in a special tax district. So, while we could charge the highest level for everyone (which I think is 8.75 at the moment), most of the customers would mind not playing their normal rate of 7.25. And I guess I can't blame them.

Answer 1

Texas does something similar - the state tax is 6.25%, then there's a local tax (like, County-specific or something) of 1% and an additional "mass transit" tax of 1%. The net effect is that when you go somewhere in Texas you pay 8.25% sales tax. And 8.25% was the maximum. In theory there could be some districts that don't charge a local tax but I've never run into any. Also in theory the local tax could be more than 1% and cause the mass transit tax to be less than 1% but again I've never seen it.

Years ago when I was a small business co-owner and we sold stuff online (downloadable data files) I went to a small seminar put on by the state to explain taxes to us. Since this was a small town I was in at the time, the local TV news came to cover the event (it was that boring of a town).

Either I or someone else asked at one point "You know, since it's complicated to figure out all this tax stuff, and it tends to be 8.25%, can't we just charge everyone 8.25% and send you that?.

The man running the seminar asked the film crew, "Is that thing filming?"

Once the film crew said no, he said "yeah, you can do that, we won't have any problem with it"

The form to submit sales tax at the time wasn't specific enough to part out where the items went in the state so we just charged 8.25% to everyone in Texas, nothing to everyone outside of Texas, and everyone was happy.

So you might be breaking your back over something California doesn't really care about anyway...

Answer 2

I agree it is very complex. Sabrix is another third-party resource who has a managed tax service for small to medium size companies as well as a large enterprise solution. Not sure what the pricing model is.