Determining your sales tax code

The sales tax tables consist of:

  1. A state sales tax table indexed by AGI and exemptions. This gives the base sales tax amount for the state.
  2. A series of local tables named “A”, “B”, “C” and “D”, indexed by AGI and exemptions. This gives an amount that when multiplied by the local sales tax rate is then added to the base sales tax for the state.

The problem is:

In 2016, TaxSlayer worksheet uses the zip code to determine the A/B/C table to use and the local sales tax rate.

(The IRS sales tax calculator is similar, but determines the local sales tax rate by either averaging the rates within the zip code or by presenting additional options to further refine the selection.)

To use the TaxSlayer worksheet accurately, you need to select the correct A/B/C table to use and you can do this by just entering a different zip code for a city that has the letter you want (see our CO sales tax map and rate chart). Then, you do enter the correct local sales tax rate that corresponds to where the taxpayer actually resides.

How do I know what table is chosen by a particular zip code?

Create a dummy return:

  • Single taxpayer, no dependents, not age 65 or blind.
  • Income – Alimony received = $75,000
  • Itemized deductions – Real estate taxes = $10,000
  • Sales tax worksheet – enter Colorado as the state, the zip code, 365 days, local rate of 1%

Go to the 1040 (or Schedule A) and examine the total itemized deduction amount (for 2017):

  • $10,474 = “A”
  • $10,497 = “B”

For example:

My taxpayer lives in Hygiene but with an 80503 (Longmont) zip code. 80503 produces a code “B” and local rate of 5.36%.

Hygiene is in Boulder County, outside of the city limits of Longmont and should be using a code “A” and a tax rate of 2.085%.

To use the TaxSlayer sales tax worksheet, I enter the zip code for Lafayette (80026) to force the code “A” and the taxpayer’s Boulder County tax rate of 2.085%.

Another example:

My taxpayer lives in Boulder County but is served by zip code 80026 (Lafayette).

Since Lafayette and Boulder County both use code “A”.  I enter the 80026 zip code as usual but enter the Boulder County tax rate of 2.085% instead of the default of 5.85%.