In certain jurisdictions, some items may not be taxed according to the standard tax rate; instead, special tax rules apply based on various criteria. These special rules are included in the appropriate Good/Service Codes.

Tax rate rules

Apply to goods or services subject to a rate other than the standard rate for all tangible personal property or taxable services in a taxing jurisdiction.

Tax rate threshold rules

Apply to goods or services subject to varying rates that depend on a taxable amount threshold. Tax rate threshold rules can be applied by item or to the total of all items on a transaction document.

There are three types of tax rate threshold rules:

Entire tax rate

Apply the tax rate above the taxable amount threshold to the entire taxable amount.

For example, in Goodyear, Arizona, sales up to $2000 are taxed at 2%. If the sale amount is over $2000, the rate drops to 1.2% for the entire sale.

Within tax rate

Apply one tax rate to the taxable amount below the taxable rate threshold and apply the second tax rate to the taxable amount above the taxable rate threshold.

For example, in Apache Junction, Arizona, sales up to $2000 are taxed at 2.2%. If the sales amount is over $2000, the first $2000 is taxed at 2.2% and the remaining amount above $2000 is taxed at 1.2%.

Multi-tiered tax rate

Apply one tax rate to the taxable amount below the tax rate threshold. The second tax rate is applied to the taxable amount above the first tax rate threshold, but below the second tax rate threshold. The third tax rate is applied to the remainder of the taxable amount.

For example, in Tennessee, the tax is 7% on all sales with an additional 2.75% tax applied to sales between the amounts of $1600 to $3200. Therefore, sales ranging from $0 to $1599.99 are taxed at 7%, sales from $1600 to $3200 are taxed at 9.75%, and sales from $3200.01 and up are taxed at 7%.

Fee rules

Apply to goods or services that apply a fee calculation (Quantity x Fee Amount = Tax Amount) rather than a tax calculation (Taxable Amount x Tax Rate = Tax Amount).

Full exemption rules

Apply to goods or services exempted from taxability within a taxing jurisdiction.

Tax amount limitation rules

Apply to goods or services for which the tax amount within a taxing jurisdiction is capped. Tax amount limitations can be applied by item or to the total of all items on a transaction document.

Taxable amount reduction rules

Apply to goods or services that are partially exempt. An example of a taxable amount reduction is the 50% reduction in the taxable base for sales and purchases of some types of software maintenance contracts in the state of Virginia.

Taxable amount increase rules

Apply to goods or services subject to a tax rule that applies to more than 100% of the sales price.

Taxable amount threshold rules

Apply to goods or services with different taxability below and above a taxable amount threshold. Taxable amount threshold rules can be applied by item or to all items on a transaction document.

There are three types of taxable amount threshold rules:

Tax all if above

If the taxable amount is below the threshold, the entire amount is not taxed. If the taxable amount is at or above the threshold, the entire amount is taxed.

Exempt all if above

If the taxable amount is at or above the taxable amount threshold, the entire transaction is exempt. If the taxable amount is below the threshold, the entire transaction is taxed.

Tax the amount above

If the taxable amount is below the threshold, the entire amount is taxed. If the taxable amount is at or above the threshold, only the amount above the threshold is taxed; the amount below the threshold is still exempt.

Taxability group rules

Apply to goods or services subject to the taxability rule of a separate line item.