For the following example, let's suppose we operate a store in Boulder, Colorado. Our local laws tell us that we must charge tax for any sales we make to customers located in Colorado, and additional taxes on top of that for customers in Boulder County, and another tax on top of that for customers in the city of Boulder.
Example 5.1. Configuring Taxes for a Store in Boulder, Colorado
Add the first tax rate for all customers in Colorado. For "Country", select "United States" and for "State" select "Colorado". For "Amount", enter "2.9" for 2.9% state sales tax. Leave the other fields as "[Any]".
The actual tax rates may be different than those used in this example. Please research the current tax rates for your area.
Click the "Add New Record" button to add the first rate. This first rate will apply to all orders whose delivery addresses are in the United States and Colorado.
Now begin adding the tax rates for customers in Boulder County. To do this, we must find out all the postal codes that correspond to Boulder County. Research tells us the following postal codes apply: 80510, 80329, 80328, 80323, 80322, 80321, 80314, 80310, 80309, 80308, 80307, 80306, 80305, 80304, 80303, 80302, 80301, 80038, 80021, 80020, 80025, 80516, 80533, 80455, 80026, 80504, 80503, 80502, 80501, 80028, 80027, 80540, 80466, 80544, 80471, 80481.
Add a tax rate record for each of the above postal codes. For each one, select "United States" as the country and "Colorado" as the state. For "Amount", enter ".65" for .65% county sales tax. Leave the city field marked as "[Any]".
Click the "Add New Record" button to add each of the rates for Boulder County.
Finally, add a tax rate for the city of Boulder sales tax. For "Country", select "United States", for "State" select "Colorado", and for "City" type in "Boulder". For "Amount", enter "3.41" for 3.41% sales tax. Leave the postal code field as "[Any]".
Click the "Add New Record" button to add the tax rate for the city of Boulder.
With these rates set up, each time a customer comes through checkout and uses a delivery address in Colorado, the tax rate corresponding to Colorado will be applied. If the delivery address's postal code matches one of Boulder County's postal codes, the county tax rate will also be applied. And if the delivery address's city matches "Boulder", the city tax rate will also be applied.
Postal codes do not always line up precisely with county boundaries, and sometimes an address might use a given city for its mailing address but actually be outside that city's tax district. In other words, using Basic Tax Rates may not be 100% accurate for 100% of your customers, but it is likely to be accurate for the vast majority.
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