The order form gives the buyer the opportunity to indicate its tax status. The system requires that the vendor manually determine the taxability of items in each state in which it must collect tax. This may require considerable work on the part of the vendor that must collect tax in more than one state. For instance, clothing may be taxable in one state and not in another. A vendor with multiple products, taxable in multiple states, will find determination of what is and what is not taxable burdensome under this system.
Some products have special tax rates in certain states.
This system does not allow the vendor to identify the type of product sold and any special rates that may apply. Therefore, all products in the store will be subject to the same tax rate, regardless of whether that is the correct rate. When the vendor files its sales tax return, it will have to properly calculate the tax due, both state and local, based on actual addresses and products sold. The tax calculated on the sales tax return will, in many cases, be higher or lower than the tax collected. It will not allow the vendor to receive a report of sales based on state, city, Zip Code, or any other basis that might be used to summarize sales for sales tax reporting.