Overview

Amazon's Tax Calculation Service includes a custom rate feature that lets sellers assign a fixed tax percentage for orders shipped to specific states. This option overrides the default product tax code rules and jurisdictional rates provided by Amazon's tax software, giving sellers more direct control over how sales tax is calculated at the state level. Understanding when and how to use custom rates is essential for sellers who need precise tax handling in certain jurisdictions.

Key Points / What Sellers Need to Know

• Custom rates override default tax rules - When you set a custom rate for a state, it replaces the standard product tax code calculations, including sales tax holidays and reduced rate provisions, with your specified flat percentage.
• Product tax codes are still required - You must have a product tax code assigned at the item or default level before a custom rate can take effect. The custom rate works as an override layer on top of existing tax code assignments.
• Non-taxable items are exempt from overrides - Custom rates will not override items assigned the A_GEN_NOTAX product tax code, meaning items designated as non-taxable remain unaffected regardless of your custom rate settings.
• Zero-rate states are unaffected - States that have a zero tax rate at the jurisdiction level, such as those without a statewide sales tax, will not be overridden by a custom rate.
• Rate range is limited - Custom rates can only be set between 1% and 15%, and sellers are expected to set rates that accurately reflect the actual sales or use tax rate for the jurisdiction.

How Custom Rates Work

When a seller enables a custom rate for a particular state, Amazon's tax calculation engine applies that flat percentage at the state jurisdiction level instead of using the standard tax tables and product tax code logic. This means the system bypasses the usual multi-layered calculation that accounts for product-specific exemptions, reduced rates, and tax holidays. The custom rate appears as A_CUSTOM_RATE in your sales tax reports, making it easy to identify which orders were processed using this override. It is important to understand that the calculation applies only at the state level and does not break down into county, city, or district-level tax components.