Read this page carefully if you have a responsibility to collect and remit tax in any of the following states:
In most states, vendors are required to collect all local taxes if they're required to collect the state tax. When you add one of those states as a region where you collect tax in AvaTax Update, AvaTax Update performs tax calculations for all local jurisdictions (county, city, and special tax jurisdictions) automatically. For example, once the state of Kansas is selected, AvaTax Update automatically calculates a state, county, and city tax on a taxable transaction in the city of Topeka.
However, the states listed above require you to select local authorities for AvaTax Update to accurately process a transaction in a county, city, or special tax jurisdiction within them. If you don't collect tax for the local jurisdictions, your customer may be responsible for paying use tax.
Correctly choosing how to maintain optional local jurisdictions in AvaTax Update is critical to getting accurate tax calculations. If you're at all uncertain about where you should be collecting and remitting taxes:
- Contact the appropriate state or local tax agencies. Each state defines the rules for when a business is required to collect and remit sales and use tax. Therefore, each state and their tax agencies are the source for the final decision regarding if you need to collect and pay sales tax based on your business practices.
- Contact your Customer Account Manager (CAM) for more information about Avalara Professional Services. Avalara provides a variety of professional tax services, including nexus studies, voluntary disclosure agreements, and tax registration services.
We strongly advise you to contact Avalara Professional Services, an accountant, a tax attorney, or another qualified tax professional to conduct a nexus analysis for your business.
When you tell AvaTax Update to collect tax in one of the states listed above, you'll be prompted to add any optional local authorities. You can add local authorities by entering an address or by selecting them from a list. For California and Texas, AvaTax Update automatically selects all optional local authorities for you, but you can change these selections, if you need to. You tell AvaTax Update where to collect tax when you set up your company and under Settings > Manage Where You Collect and Remit Tax.
Below is a summary of how AvaTax Update handles the local jurisdictions for each state listed above. Be sure to review and understand each state before altering the configuration in AvaTax Update.
AvaTax Update lists self-administered jurisdictions only. Tax is automatically calculated for all state-administered jurisdictions. Select the check box next to the local jurisdictions where you're required (or want) to collect. Bear in mind that once you start collecting tax in a self-administered jurisdiction, you're liable for filing a return there.
All local jurisdictions listed are self-administered. Select the check box next to a local jurisdiction only if you're required to collect in that jurisdiction. To collect tax in Alaska, you must add local jurisdictions.
All local jurisdictions, other than local reservation districts, are state-administered. By default, AvaTax Update selects all local jurisdictions for you. You can change this, if you need to. The Arizona license type you initially apply for determines whether you file a transaction privilege tax (Tax type: Sales tax) or use tax (Tax type: Sales or sellers use tax) form. If you're a use tax (Tax type: Sales or sellers use tax) filer, no county tax is calculated.
All local jurisdictions are state-administered. Local jurisdictions listed represent those on the state’s District Tax Schedule (supplemental schedule to state return). By default, AvaTax Update selects all local jurisdictions for you. You can change this, if you need to.
Per the state:
- As a seller, you must collect, report, and pay district sales tax (called a transaction tax) or use tax on your taxable sales and leases if you:
- Have a business location or are engaged in business within the district;
- Lease, store, or consume tangible personal property in the district; or
- Sell or lease vehicles, undocumented vessels, or aircraft that will be registered in the district.
- You're engaged in business in a district if you are a retailer who:
- Maintains, occupies, or uses any type of office, sales room, warehouse, or other place of business in the district, even if it is used temporarily, indirectly, or through an agent; or
- Has any kind of representative operating in the district for the purpose of making sales, making deliveries, or taking orders; or
- Receives rental income from leases or tangible personal property located in the district.
There are some differences between the rules that apply to the payment of taxes in districts and the payment of sales and use taxes in general. You should refer to Publication 44 (tax tips for district taxes) for more information.
In most cases, AvaTax Update automatically selects and maintains the local jurisdictions that are considered mandatory or compulsory, but none of the optional jurisdictions. The exception to this scenario is Colorado. A compulsory local jurisdiction is one that requires collection of tax if you have nexus in the state. Since these jurisdictions are compulsory, they can't be selected.
AvaTax Update lists all local jurisdictions, both state-administered and self-administered. Counties are always state-administered.
Complicated formulas exist for intrastate transactions.
- If shipping from and to the same city, your business needs to calculate city tax if the local jurisdiction is state-administered (or if the local jurisdiction is self-administered and your business is registered in that jurisdiction).
- If shipping from and to a different city, your business does not need to collect city tax.
- If shipping from and to the same county, your business needs to calculate county tax.
- If shipping from and to a different county, your business does not need to collect county tax.
The only state-administered jurisdictions that are required for out-of-state sellers are transit-related special taxing jurisdictions.
All local jurisdictions listed are self-administered. Select the check box next to a local jurisdiction only if you're required to collect in that jurisdiction.
All local jurisdictions are self-administered, including parishes and their special tax jurisdictions. Be sure to select special tax jurisdictions that apply to parishes.
AvaTax Update selects and maintains the local jurisdictions that are considered required. Be sure to select any optional local jurisdictions.
All local jurisdictions are state-administered. By default, AvaTax Update selects all local jurisdictions for you. You can change this, if you need to.