1040-US: Adjusting sales tax when a state or locality changed their sales tax rate mid-year

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Question

What should I do if a state or locality changed their sales tax rate mid-year?

Answer

When a state or locality changes their sales tax rate resulting in two different rates during a single tax year, a blended rate is needed. To calculate the blended rate, multiply each rate by the percentage of the year in which the rate was in effect and add the results.

Note: The IRS sales tax tables published in the Schedule A instructions usually reflect the blended rate for a state whose rate changes during the calendar year.

Example: If rate A, which is 3.00 percent, was in use for 91 days and rate B, which is 4.00 percent, was in use for 275 days, the blended rate is .037 percent, which is calculated as follows:

  • Rate A: 91/366 * 3% = .007
  • Rate B: 275/366 * 4% = .030
  • Blended rate: .007 + .030 = .037 (3.7%)

Related topic: Sales tax FAQs (1040)

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