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Bracket system examples

Florida, Alabama, and Maryland are the only states that use a bracket tax system.
Note that in these examples, the taxable basis is understood to be the gross amount minus any exemptions (or other deductions).

Florida

Florida has a bracket for state sales tax as well as several brackets of combined state and local rates. The taxing authority determines the appropriate bracket to use, according to the percentage of discretionary sales surtax to apply.
If Determination identifies a transaction taxable basis to include when applying a combined rate as specified by the taxing authority, the whole dollar amount is taxed at the combined rate (of which 6% is the state tax and the remainder is the discretionary sales surtax paid to a local authority). The cents is evaluated against the state bracket, and the result is then added to the state tax amount.
Schedules for combined rates (provided by the state) indicate the percentage allocated to general sales state tax and to a discretionary sales surtax rate.
Example:
 Combined rate 6.5% (6% is general sales tax and .5% is discretionary sales surtax)
In this example, $45.04 is paid to the state (state + bracket) and $3.75 to the Orange County authority.
Transaction details
Amount
Total transaction gross amount
These authorities are involved:
  • FL: ORANGE, COUNTY DISCRETIONARY SALES SURTAX/USE TAX
  • FL: STATE SALES/USE TAX
  • FL: STATE (BRACKET) SALES/USE TAX
$750.50
Whole dollar portion * 6% state sales tax.
$750.00 * 6.0% = $45.00
Whole dollar portion * .5% discretionary sales surtax
$750.00 * 0.5% = $3.75
Cents (referenced against bracket schedule)
$0.50 = $0.04
Example:
 Combined rate 7.5% (6% is general sales tax and 1.5% is discretionary sales surtax)
In this example, $7.48 is paid to the state (state + bracket) and $1.81 to the Escambia County authority.
Transaction details
Amount
Total transaction includes 6 different retail items.
  • Item A is $4.24
  • Item B is $1.11
  • Item C is $1.11
  • Item D is $38.99
  • Item E is $38.99
  • Item F is $38.99


These authorities are involved:

  • FL: STATE SALES/USE TAX
  • FL: ESCAMBIA, COUNTY DISCRETIONARY SALES SURTAX/USE TAX
  • FL: STATE (BRACKET) SALES/USE TAX
$123.43
Tax Rate
Item A
Items B and C
Items D, E and F
Whole dollar portion * 6% state sales tax
$4.00 * 6% = $0.24
$1.00 * 6% = $0.06
$38.00 * 6% = $2.28
Whole dollar portion * 1.5% discretionary sales tax
$4.00 * 1.5% = $0.06
$1.00 * 1.5% = $0.02
$116.00 * 1.5% = $.57
Cents referenced against bracket schedule
$0.24 = $0.02
$0.11 = $0.01
$0.99 = $0.08
Total tax per item
$0.32
$0.09
$2.93
Item A ($0.32) + Items B and C ($0.18) Items D, E, and F ($8.79) = Total Tax ($9.29).

Alabama

In transactions where the combined tax rate's higher than the 4% state general rate, standard rounding rules are applied. The 4% combined rate's applicable to state-only transactions, but is also applicable in reduced rate scenarios where the Agricultural or Manufacturing rates apply. In transactions where only the 4% Alabama state general tax rate applies, the whole dollar amount is taxed at the 4% rate, and the cents are taxed according to the bracket schedule (according to the Alabama Tax Rate Chart).
The 2 amounts are added together to derive the total tax amount.
Transaction details
Amount
Total transaction amount. These authorities are involved:
  • AL: STATE SALES/USE TAX
  • AL: STATE (BRACKET) SALES/USE TAX
$45.55
Whole dollar portion * rate
$45.00 * 4% = $1.80
Cents (referenced against bracket schedule)
$0.55 = $0.03
Total tax
$1.83

Maryland

Maryland requires the 6% standard rate in order for the bracket to be applied. Calculation logic for Maryland evaluates both the combined rate and the taxable basis.
2 bracket groups apply in Maryland, depending on the amount of taxable sales:
  • For sales where the taxable basis is less than or equal to $1.00, the tax is assessed according to the graduated bracket schedule.
  • For sales where the taxable basis exceeds $1.00, the 6% general sales tax applies to whole dollar amounts, plus an amount derived from the graduated bracket schedule calculated on the remaining cents. The 2  amounts are added together to derive the total tax amount.
Transaction details
Amount
Total transaction amount. These authorities are involved:
  • MD: STATE SALES/USE TAX
  • MD: STATE (BRACKET) SALES/USE TAX
$751.24
Whole dollar portion * rate
$751.00 * 6% = $45.06
Cents above $1 (referenced against bracket schedule
$0.24 = $0.02
Total tax
$45.08

This article applies to:

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

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