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Why ZIP Codes Don’t Deliver Everything Needed to Calculate DMV Taxes and Registration

July 20, 2020, Out of State, Titling, Zip Codes

Here at ATC, we’re often asked: “Can I just use a ZIP Code to calculate vehicle taxes and registration fees?” The short answer to this question is “Not if you want accurate results.”

ZIP Codes are an easy data point to capture from consumers, but this is just the starting point when it comes to calculating title and registration fees for motor vehicles. Did you know that ZIP Codes are actually a United States Postal Service designation?  ZIP Codes help the post office deliver your mail, but they don’t necessarily follow tax jurisdictions. Tax jurisdictions are determined by local governments and normally consist of a state, county, and city combination the local DMV uses this to calculate taxes. The footprint of a ZIP Code often spans multiple cities or counties – this can be a problem when calculating taxes and fees.

Tax and registration fee calculations are complex! The more information a consumer provides, the more accurate the tax and fee calculation will be.

But what if I only have a ZIP? We can help. Our API includes a tool to help translate from ZIP Code to tax jurisdiction. The ZIP Code decoder will return all the state, county, and city combinations based on the input ZIP Code. This means you can better calculate the taxes due and easily identify the “next level” information needed from the user.

When the ZIP Code is entered by the end-user and our API returns multiple outputs, the best practices are to verify the consumer’s state, county, and city.  At ATC, we understand that user intervention is not always an option in the digital world. Our clients handle this in a few different ways. In cases where a ballpark estimate of taxes and fees is fine, some clients choose to display the taxes for the first combination returned. In this case, we recommend including a notation that the fees may not be accurate if only a ZIP Code is entered. Other clients provide a range of values based on the possible jurisdictions.  Finally, some clients have a dynamic service where the more information a user provides, the more granular the response becomes.

For more information about how ATC can help you by providing the most accurate tax and registration fee data, contact us at https://atc-api.com/.

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