The practice of taxation doesn’t just need representation to remain palatable. Taxing bodies, like unruly teenagers, need boundaries lest they run wild and out of control.
The problem with boundaries, however, is that they can be changed. And in an economy such as ours, boundaries are being changed at an alarming rate as various taxing bodies jockey to protect and grow their revenue, leaving tax professionals in telecom, utilities and other verticals scrambling to keep up.
In 1776, the new United States of America wasn’t exactly busting at the seams with 2.5 million people the way it is today. And most of those who paid taxes did so only on a local level, so the boundaries were less formal. Benjamin Franklin was only a year into his job as the first Postmaster General. Zip codes, which later became the de facto system for not only mail delivery but for taxation boundaries wouldn’t be needed until the year John F. Kennedy was shot.
Today, there are 44,000 Zip codes and more than 40 million Zip+4 records that are often used to form the boundaries for local governments, municipalities, townships, counties, Congressional districts, school districts, park districts, utility and transit districts, and other taxing bodies reaching out for their portion of your tax dollars.
Striving for Accuracy
And even Zip+4 is only an approximation of some boundaries. More recently, street-level geocoding is being used to get a more granular assessment of those boundaries to ensure that companies who sell products and services within those boundaries are taxing accurately.
Bob Meador, director of GeoTax product management at PBBI (PBBI), said that the number of changes to municipal boundaries and special tax districts is on the rise: “A few years ago there were 4,800 changes annually in the U.S. Two years ago the number went up to 6,600, and there are new tax districts being created all the time."
Texas, for example, has grown from 109 tax districts to 160 in the last few years. Zip codes don’t work very well there," Meador said. “Plus, as post offices close around the country, they are getting even less accurate."
That’s why most service providers have gone away from using Zip codes to more street level geocoding despite the requirement in the Mobile Telecommunications Sourcing Act (MTSA) that only calls for Zip+ 4 accuracy.
