Tax Methodology

Last Updated: April 2, 2026

1. Sales Tax Calculation Methodology

Source Hierarchy

AgentTax cross-references seven independent sources for every state sales tax rate: Tax Foundation state rate tables, TaxJar (Stripe), TaxCloud, TaxValet, Sales Tax Institute, state Department of Revenue (DOR) websites, and legislative databases. When all sources agree, the rate is published with high confidence. When sources disagree, the state DOR published rate is treated as authoritative. Third-party sources are used for cross-verification and discrepancy detection, not as primary authorities.

Confidence Scores

Every rate returned by the AgentTax API includes a confidence score indicating the level of agreement across sources:

• High (85–100): All sources agree on the rate. No discrepancies detected.
• Medium (60–84): Minor discrepancy between one or more third-party sources, but the state DOR rate is confirmed and published.
• Low (below 60): Sources disagree and manual review is pending. The response includes an advisory flag.
• Flagged: The rate has recently changed (e.g., legislative update or ballot measure). The new rate is published but awaiting full re-verification across all seven sources.

Discrepancy Resolution

When sources disagree, the state Department of Revenue published rate is treated as the authoritative value. All discrepancies are logged internally with timestamps, source values, and resolution status. Discrepancies are flagged for manual review by the AgentTax team. Rates are not updated in the engine until the correct value is confirmed against the state DOR source. The daily verification cron job re-checks all 51 jurisdictions against their DOR-published rates and sends an alert if any rate drifts from the engine value.

Local Jurisdiction Rates

When a buyer_zip is provided in a /calculate request, the engine looks up local tax rates from a database of approximately 43,000 US zip codes. The combined rate (state + local) is returned alongside the individual components. Self-administered localities — jurisdictions that collect their own sales tax independently of the state (e.g., Denver, CO; certain Louisiana parishes) — include an advisory note indicating that separate registration and remittance may be required.

Texas §151.351

Texas taxes data processing services at 80% of the transaction value, providing a statutory 20% exemption under Texas Tax Code §151.351. AgentTax applies this reduction automatically when the transaction is classified as data_processing or compute and the seller or buyer jurisdiction is Texas. The 80% taxable amount is reflected in the response breakdown, and the confidence score accounts for this statutory rule.

2. Economic Nexus Monitoring

Background

Since the U.S. Supreme Court's decision in South Dakota v. Wayfair, Inc. (2018), states can require remote sellers to collect and remit sales tax once they exceed an economic threshold in that state. Thresholds are typically based on annual sales revenue, transaction count, or both. Crossing a threshold in a state creates “economic nexus” — a tax collection obligation — even if the seller has no physical presence there.

Year-to-Date Tracking

AgentTax tracks year-to-date (YTD) revenue per jurisdiction from every /calculate call associated with your entity. This running total is compared against each state's published economic nexus threshold. Revenue figures reset at the start of each calendar year. You can view your current YTD totals per state in the dashboard or via the /nexus-alerts endpoint.

Alert Triggers

The /nexus-alerts endpoint returns alerts at two thresholds: 80% (approaching nexus) and 100% (nexus established) of each state's published threshold. Alerts are also included inline in /calculate responses when a transaction pushes you past either trigger point. This gives you advance warning to begin the registration process before you are legally required to collect.

State Threshold Reference

Most states set their economic nexus threshold at $100,000 in annual sales. Notable exceptions:

• Texas and California: $500,000 in annual sales.
• Alabama and Mississippi: $250,000 in annual sales.
• No sales tax: Five states impose no general sales tax and require no sales tax registration — Oregon, Montana, New Hampshire, Delaware, and Alaska. Note that Alaska has no state sales tax, but individual Alaska localities may impose local sales taxes through the Alaska Remote Seller Sales Tax Commission.

Marketplace Sales

Revenue from transactions where you act as a marketplace facilitator counts toward your economic nexus thresholds in each state. Most states with marketplace facilitator laws require the marketplace (not the individual seller) to collect and remit once the marketplace itself crosses the threshold. Track marketplace-facilitated revenue alongside direct sales to ensure accurate nexus monitoring.

3. Capital Gains Methodology

Cost Basis Methods

AgentTax supports three cost basis methods for computing realized gains and losses on digital asset trades:

• FIFO (First In, First Out): Sells the oldest acquired lots first. This is the default method if no method is specified in the request.
• LIFO (Last In, First Out): Sells the most recently acquired lots first. This can result in different gain/loss outcomes depending on price movement between acquisitions.
• Specific Identification: The seller designates which lot to sell by providing the lot ID in the trade request. This gives maximum control over realized gains but requires tracking individual lot identifiers.

The cost basis method is specified per trade via the /trades endpoint. If no method is provided, FIFO is used by default.

Holding Periods

The holding period determines whether a gain or loss is classified as short-term or long-term:

• Short-term: Asset held for 365 days or fewer. Taxed at ordinary income rates.
• Long-term: Asset held for more than 365 days. Eligible for preferential long-term capital gains rates.

The holding period begins the day after the acquisition date. For example, an asset acquired on January 1 has a holding period starting January 2. A sale on January 1 of the following year would be short-term (365 days); a sale on January 2 of the following year would be long-term (366 days).

Fractional Quantities

AgentTax supports up to 8 decimal places for asset quantities (e.g., 0.00000001). This accommodates high-frequency trading scenarios common in AI agent commerce, where agents may trade fractional units of tokens, compute credits, or other digital assets in rapid succession. All arithmetic is performed with sufficient precision to avoid rounding errors across fractional lot splits.

Taxable Events

• Buy: Creates a cost basis lot with the acquisition date, quantity, and price per unit. No taxable event is triggered at acquisition.
• Sell: Triggers a realized gain or loss by matching the sold quantity against open lots using the specified cost basis method (FIFO, LIFO, or Specific ID). The gain or loss equals the difference between the sale proceeds and the cost basis of the matched lots.
• Staking income: Staking rewards are treated as ordinary income at the time of receipt, taxed at the fair market value on the date received. This is not a capital gains event. The received amount establishes a new cost basis lot with the receipt date and fair market value as the basis. A subsequent sale of staked assets triggers a capital gain or loss measured from that new basis.

NFT Treatment

Non-fungible tokens (NFTs) are subject to the same capital gains rules as other digital assets. Acquiring an NFT creates a cost basis lot; disposing of it triggers a realized gain or loss. The taxability of the underlying transaction — for example, purchasing an AI model packaged as an NFT, or an AI-generated artwork — varies by state and may depend on whether the item is classified as tangible personal property, a digital good, or a service. Consult a qualified tax professional for classification guidance specific to your use case.

4. 1099-DA Reporting

Reporting Trigger

IRS Form 1099-DA is required when digital asset gross proceeds exceed $600 in a calendar year for a given counterparty. AgentTax tracks cumulative gross proceeds per counterparty and flags when the $600 threshold is crossed.

Field Mapping

The /export/1099-da endpoint returns structured JSON that maps directly to IRS Form 1099-DA fields:

• Filer information (name, TIN, address)
• Recipient information (name, TIN, address)
• Gross proceeds from digital asset transactions
• Date acquired and date sold
• Cost basis (if available)
• Gain or loss amount
• Holding period (short-term or long-term)

User Responsibility

The /export/1099-da endpoint produces a draft export. You are responsible for verifying all figures, confirming recipient taxpayer identification numbers (TINs), and filing the completed form with the IRS. AgentTax does not file tax forms on your behalf and is not responsible for the accuracy of user-provided data such as counterparty names, TINs, or wallet addresses. The export is a tool to assist your compliance workflow — it is not a substitute for professional tax preparation.

5. Disclaimers

AgentTax provides tax calculation tools and data for informational purposes only. Nothing on this page or in API responses constitutes professional tax, legal, or accounting advice. AgentTax is a technology platform operated by Agentic Tax Solutions LLC — it is not a licensed CPA firm, enrolled agent, tax preparer, or tax attorney.

Tax law changes frequently. The methodology described on this page is reviewed and updated quarterly. The “Last Updated” date at the top of this page reflects the most recent review. Between reviews, individual rate changes are applied as they are confirmed against state DOR sources via our daily verification process.

Always consult a qualified tax professional before making compliance, filing, or remittance decisions based on AgentTax outputs. See our full Legal Disclaimer and Terms of Service for complete details.