It's all about the jurisdictions.
What's up with the map?
This map serves as a reference to the thousands of individual taxing jurisdictions in the United States, and around the world. Each colored tile represents a jurisdictional boundary with an aggregate sales tax rate based on tax authorities, such as states, cities, counties, and transit authorities. There are over 10,000 unique taxing jurisdictions in the United States alone!
What about sales tax by ZIP codes?
ZIP codes are commonly believed to be the basis of a sales tax jurisdictional boundaries and rates. While this may appear accurate in some cases, geolocation based rooftop accuracy is the most precise way to determine a rate. Sales tax is imposed by local and regional governments and have no direct correlation between ZIP code boundaries and tax jurisdictions.
How complex can it get?
The short answer: Very! Because tax jurisdictions aren't limited directly to geographical or political boundaries within a state, boundary borders can often be unintuitive, confusing, and near impossible to determine an accurate rate for. It is not uncommon for jurisdictions to be broken up and scattered over a given city.
What about states without sales tax?
Some states have not state sales tax and that makes everything easy, right? Wrong. States might appear deceptively simple, such as Alaska, which has no state sales tax. However, there are over 100 municipalities with varying degrees of imposed transactional tax making this state appear deceptively simple. In reality, it is very difficult to remain sales tax compliant.
Where does product taxability fit into this?
Product taxability adds another complex cog in the sales tax machine. Depending on what your selling, an item might be subject to a unique taxability rule in addition to the standard aggregate tax rate and this varies from jurisdiction to jurisdiction. Unique situations surface and special cases need to be made when an item or service is sales tax exempt, the buyer of your product or service is sales tax exempt, or if there is a sales tax holiday for a specific class of products (E.G. School supplies, footwear, and firearms).