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Bracket tax system - U.S. authorities

In the United States, states may use different types of tax structures to impose tax on taxable sales.
Many states round the tax amount to the nearest cent. This works for most states, but not all.
Alabama, Florida, and Maryland have a tax structure that includes a bracket system on taxable sales that can't be calculated by simply rounding the amount.
Rules differ from state to state, but in general, a fee's applied to the fraction of a dollar (cents) of the taxable basis, in addition to the regular tax rate on whole dollar amounts. Based on the fraction of the dollar, a fee's applied according to the state's published graduated schedule. The total tax amount's calculated by adding the two tax amounts together.
You can record bracket transactions in the Audit database in the same way that you can record non-bracket transactions.

Who should use a bracket tax system?

Any business that has retail or ecommerce sales or a specialized business such as retail online sales should use the bracket system.
For each of the state bracket authorities, Determination provides rules for applying the correct tax, but doesn't tie any products to the rules. You'll need to create your own custom product rules to make sure the bracket system only applies to the appropriate retail transactions.
When transactions are passed in to Determination via XML input, a tax code should be present in the data or implemented and applied to the appropriate transactions using a TransEditor. Standard tax fees, rules and rule qualifiers are triggered that indicate the bracket system should be used in tax calculations.

Turn on the bracket authorities

The U.S. Bracket Authorities are included when you download current tax data content. The authorities are turned off by default.
The user with the role of Tax Data Administrator will need to turn the bracket system on for each company that's doing business in a bracket jurisdiction.
After you turn on the bracket authorities, bracket results are returned for any transaction in that jurisdiction. That means that a company that includes both retail (brick and mortar and ecommerce) as well as manufacturing-type transactions will be taxed at the bracket tax system rate.
If you don't want all your transactions to be processed under the bracket system, you can use specific data elements (for example, tax code or product code) to trigger only the rules that apply for the bracket authority. If you decide not to set up custom rules to apply bracket results to only certain transactions, all retail as well as non-retail transactions will receive the bracket tax results.

This article applies to:

  • Product: ONESOURCE Determination, ONESOURCE Indirect Tax
  • Subject: Authorities

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