How a combined rate is built
Forty-five states and Washington, DC charge a statewide sales tax. Many also let counties, cities and special districts (transit, stadium, tourism) add their own. The rate at the till is the sum of every layer that applies at the store's address. Two stores in the same city can have different rates if they sit in different districts, so look up each address, not the city name.
Most state revenue departments publish a rate lookup by address. Use it, write down each layer and the total, and save the page with the date. Rates usually change at the start of a quarter.
What is taxable varies by state
Each state decides what is taxed. Many exempt groceries or tax them at a lower rate, while prepared food and restaurant meals are usually taxed in full. Some states exempt clothing under a price limit, and some tax certain services. A few states also let localities tax differently from the state.
List the categories you sell and check each against your state's rules. Then group products by tax treatment: fully taxable, exempt, reduced rate. Most small businesses end up with two or three tax groups, not dozens.
Nexus, in short
You must collect a state's sales tax if you have nexus there. A physical store, warehouse or staff in the state creates nexus. Since the 2018 Wayfair decision, states can also require out-of-state sellers to collect once sales into the state pass an economic threshold, commonly $100,000 a year. For a store that only sells in person, the practical answer is simple: collect your own state's tax at your address. If you ship to other states, get advice.
One rate or layers on the receipt
You can set up the combined rate as a single tax, which keeps receipts simple, or as separate state and local rates in one group, which shows each layer and makes it easier to update one layer when it changes. Either way, test a few sales by hand: a taxable item, an exempt item, and a mixed basket. Make sure the tax report total matches what you would file.
Doing it in SeroPOS
SeroPOS handles US sales tax with tax rates and tax groups in the back office or the app.
- Back office, Settings, then Tax Rates: add each layer, for example State 6.25%, County 0.5% and City 1.5%, or one combined rate.
- Settings, then Tax Groups: combine the layers into one group for the store, such as 'Main St 8.25%'.
- Add a 0% rate for exempt items. A 0% rate in SeroPOS means exempt.
- Set the default tax in the app under Admin, then Taxes, or in Business Settings, then Sale, so new products pick it up.
- On each product, choose the tax group and whether the price includes tax.
- Use the Tax Report for the period's output tax, input tax and net when you file.