The Five-Digit Code That Could Cost You

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Here are some fun facts about ZIP (Zone Improvement Plan) codes:

  1. The easiest ZIP code to remember is 12345, a unique ZIP Code for General Electric in Schenectady, NY.
  2. Due to thousands of letters addressed to Smokey Bear, the US Postal Service gave him his own unique ZIP code (20252).
  3. Bristol, TN and Bristol, VA share a Post Office. The office sits on the border between Tennessee and Virginia, and has two different ZIP codes.

In many ways, ZIP codes are like sales tax jurisdictions. They’re not required to be a fixed shape. They’re dynamic, and their boundaries are often redefined. But they key is that while they have similar attributes, ZIP codes are not the same as tax jurisdictions. There are times when they do coincide, but there are also many times when they don’t. So knowing that both ZIP codes and tax jurisdictions are quirky and subject to change independent of one another, why would you rely on ZIP codes for accurate sales tax calculation? Yet many companies do just that, putting themselves at unnecessary audit risk.

The only way to be certain of charging the correct tax rate for a given jurisdiction is to have rooftop level accuracy, pinpointing the exact location of the transaction, and in turn identifying the corresponding tax jurisdiction.

Rooftop Level Accuracy

AvaTax by Avalara offers a cloud-based sales tax automation service that integrates seamlessly with your Microsoft Dynamics ERP. The service uses geo-coding technology to validate the transaction address and retrieve the correct rate. Avalara’s team of compliance experts work around the clock to ensure that you always have the most up-to-date rate, rule, and boundary information at your fingertips.

Automating sales tax not only reduces your audit risk, but as with most things you automate, it will save you time and money.

ZIP Codes were created by the US Postal Service for the sole purpose of delivering mail. They were never intended for use in sales tax calculation. To learn more about the dangers ZIP code based sales tax management, join Avalara for a 15 minute webinar brief on February 26 at 9 AM PST / 12 PM EST “ZIP Codes & Sales Tax Management: The Five-Digit Code That Could Cost You”.

by Avalara

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