A Case for the Necessity of Address-Based Taxation Services
- Sales and Use Tax
- June 28, 2011 | Erin Wiggins
Residents of Matanuska-Susitna County, Alaska who live outside Wasilla city limits have been incorrectly charged the city sales tax rate of 2% (on telephone, internet and cell services) for over two years due to a shared zip code for unincorporated and incorporated addresses. Laura Chase, a former councilwoman for Wasilla whose phone bills have been wrongly taxed, sees the charges as “taxation without representation”. Although the city will provide those who come in and prove their address is outside city limits with the documentation required for reimbursement, the problem extends to nearby cities that share the same zip code, such as Houston, which has the same sales tax rate as Wasilla. For Houston residents that use the Wasilla zip code, their taxes are being remitted to the city of Wasilla despite Houston’s pending bankruptcy. This example demonstrates the need for address-based taxation services that offer more precision than a single 5-digit zip code, not only for consumers but just as importantly for the localities that depend on sales tax revenues to operate. In a time of recession and massive governmental budget deficits, the accurate collection and remittance of sales tax dollars is essential to the provision of citizen services at the local, state, and federal levels. Avatax - Avalara’s automated sales tax calculation service - employs proprietary geocoding technology to validate an address and match it to our nation-wide database of tax regions. When a transaction is made, a business’ ability to calculate the correct sales tax rate for the correct jurisdictions will protect it from risks and hassles such as audits, penalties, return reconciliation, and reimbursements. The Avatax service, in addition to the Avalara suite of products and services, supports the common business goals of efficiency, compliance, and success.