Kintsugi calculates sales tax based on the transaction location, applicable tax jurisdictions, and the product or service being sold. This article explains how we derive the rate you see on a transaction and why it may differ from the rate you expected.

Sales tax in the United States is layered. A single transaction may include state, county, city, and special district taxes at the same time.

How the rate is built

For each taxable transaction, Kintsugi determines the combined sales tax rate by adding together the tax layers that apply at the transaction location.

• State rate: The base sales tax rate set by the state

• County rate: An additional rate that may apply in the county

• City or municipal rate: An additional rate imposed by a city or municipality in some areas

• Special district rate: Additional taxes for districts such as transit, tourism, stadium, or other voter-approved local programs

The final rate is the combined total of every applicable layer for that transaction.

Example: If a transaction is subject to a 6% state rate, 1% county rate, and 1% special district rate, the combined rate is 8%.

How Kintsugi determines which rate applies

Kintsugi uses location and transaction data to identify the correct jurisdictions and rate for each sale.

1. We identify the transaction location. This is usually based on the delivery address for shipped goods or the relevant sale location for the transaction.

2. We match that location to the correct jurisdictions. A single address can map to multiple tax authorities at once, such as a state, county, city, and special district.

3. We apply the state's sourcing rules. Some states use destination-based sourcing, while others use origin-based or mixed sourcing rules.

4. We apply the product's taxability rules. Not every product or service is taxed the same way in every state. Product category matters.

5. We calculate the combined rate. Kintsugi adds the applicable jurisdictional layers that apply to that transaction.

In many cases, sales tax is determined at the address level, not just by ZIP code. This matters because some ZIP codes cross city, county, or district boundaries.

Destination-based, origin-based, and mixed sourcing

One of the biggest reasons a rate may look different than expected is sourcing. Sourcing determines whose location controls the tax rate.

• Destination-based sourcing: The rate is based on where the product is delivered or used. This is the most common approach.

• Origin-based sourcing: The rate is based on the seller's location for certain transactions.

• Mixed sourcing: Some states apply different sourcing rules to different parts of the rate structure.

Because each state has its own rules, the same seller may see different tax behavior from one state to another.

Why your rate may differ from what you expected

If the rate on a transaction does not match what you expected, there are several common reasons.

• Special district taxes apply: Some locations have district taxes that are easy to miss because they do not match city names or visible local boundaries.

• A ZIP code spans multiple jurisdictions: Two addresses in the same ZIP code can have different rates.

• State sourcing rules differ: A state may require destination-based, origin-based, or mixed sourcing.

• Remote seller rules apply: Some states treat remote sellers differently from in-state sellers for certain transactions.

• Product taxability differs: The same rate does not always apply to every product or service. Some items are taxed at reduced rates or may be exempt.

• The expected rate came from an average or general reference: Public rate lookups and tax calculators sometimes show summary or average rates rather than the exact address-level combined rate.

If you are reviewing a specific transaction, use the full street address and the exact product type when comparing rates. General city or ZIP-code assumptions may not produce the same result.

Examples of how rate differences happen

Address-level differences

A rate can vary within the same ZIP code when one address falls inside a special district and another does not. In that situation, both addresses may appear similar, but the jurisdiction stack is different.

Layered local taxes

In some states, the total rate includes local layers beyond the base state rate. A customer may expect only the state rate, but county, city, or district taxes can increase the total combined rate.

Different tax treatment by product

Certain products, such as clothing, groceries, software, shipping, or dietary supplements, may be taxed differently depending on the state. Two transactions to the same address can produce different tax outcomes if the items are categorized differently.

What Kintsugi uses to calculate the rate

Kintsugi uses a combination of tax jurisdiction rules and product taxability rules to determine the correct rate for a transaction.

Location inputs

• Street address or transaction location

• State, county, city, and district mapping

• Applicable sourcing method

Transaction inputs

• Product or service category

• Taxability of that category in the jurisdiction

• Seller context where required by state rules

These inputs work together to produce the final sales tax rate and tax amount.

What to send us if you want a rate review

If you believe a rate is incorrect, our team can review the transaction more quickly when you provide the following details:

• Full transaction address

• Transaction date

• The rate charged by Kintsugi

• The rate you expected

• Your source for the expected rate, if available

• The product or service sold

• Any transaction ID, order ID, or invoice number

Providing the exact address is important. In many jurisdictions, the correct tax rate cannot be verified from ZIP code alone.

What happens during a rate review

When you contact Kintsugi about a rate discrepancy, we review the transaction using the address, jurisdiction mapping, sourcing rules, and product taxability applied to that sale. If we find that a jurisdictional layer or rule was applied incorrectly, we investigate and correct it as needed.

If the rate is correct, we will explain which tax layers applied and why the total differs from the expected rate.

Frequently asked questions

Q: Why does my ZIP code show a different rate than my transaction?

A: ZIP codes do not always align exactly with tax jurisdictions. A single ZIP code can cover multiple counties, cities, or special districts. Kintsugi uses the most precise location data available to determine the rate.
Q: Why is the rate higher than the state rate?

A: In most states, the total sales tax rate includes more than just the state rate. County, city, and special district taxes may also apply.

Q: Can two customers in the same city have different rates?

A: Yes. This can happen when one address falls inside a special district, when city boundaries are not intuitive, or when nearby addresses sit in different counties or taxing jurisdictions.

Q: Does product type affect the tax rate?

A: Yes. Some products and services are taxed differently by jurisdiction. An item may be fully taxable, taxed at a reduced rate, or exempt depending on the state and product category.

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