Sales tax glossary
What is destination-based sourcing?
Destination-based sourcing is a rule that taxes a sale at the rate in effect where the buyer receives the item. Most states use it, so a seller may apply a different combined rate to each order based on the delivery address, including state, county, city and district taxes.
Example
An online seller ships the same product to two customers in one state: one in a city with its own local tax, one in an unincorporated area. Each order is taxed at the rate for its delivery address.
Why it matters for sellers
Destination sourcing is why address-level rate lookup matters. A single ZIP code can span several tax jurisdictions, so a ZIP-based rate can be wrong. Accurate rates depend on the full delivery address.
Related terms
This definition is general information, not tax or legal advice. Rules vary by jurisdiction and change over time.
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