4 - Sales Tax SOW FY2025.pdf

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Project: Data for General Sales Tax Tables and Sales Tax Deduction Calculator for Tax Year 2025. The tables and calculator will be made available to taxpayers in FY 2026.

Introduction/Overview The Internal Revenue Service (IRS) is seeking Sales Tax Data, both State and Local, for the purpose of developing data that the Policy and Program Impact Lab needs to create general sales tax tables and to update the sales tax deduction calculator for IRS.gov.

Background United States tax law requires publication of State and Local general sales tax tables for taxpayers who are eligible to deduct State and local sales taxes. The IRS will use State and Local sales tax data for Tax Year 2025 to prepare these tables for the 2026 filing season. The previous purchase order this this requirement was 2032H8-24-P-00028 and it was awarded to CCH Incorporated.

Scope The objective of this requirement is to use State and Local Sales Tax data to develop General Sales Tax tables for Tax Year 2025. United States individual taxpayers will use these tables to estimate the amount of general sales tax they paid during 2025 as a possible income tax deduction.

Tasks

1. A kickoff meeting shall occur within 10 business days of the award. The meeting may include key managers and staff in the Policy and Program Impact Lab, as well as other IRS analysts and stakeholders. Topics for discussion shall include contractual tasks, deliverables, and timelines.

2. The contractor shall provide State general sales tax rates for 2025 as described below:

• This data shall be provided in an Excel spreadsheet named “2025 State Rates”.

• The spreadsheet shall include the standard two-letter State abbreviation, State Name, general sales tax rate, and its effective date.

• If the sales tax rate in a given state changed during 2025, then the rate included in the Excel Spreadsheet shall be the blended rate (i.e., the weighted average of the rates in effect during 2025, with the weight assigned to each rate being the number of days—not months—that the rate was in effect). In addition to providing the blended rate, the spreadsheet shall also specify the previous rate, the current rate and the date(s) when the rate changed.

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• This is to be delivered electronically to the IRS in an Excel spreadsheet by October 1, 2025.

• If a State’s rate changes during the year, but after the October 1, 2025 due date, then the IRS shall be notified as soon as the law to change the rate has been enacted.

3. The contractor shall provide data from existing databases for Spending Categories identified by the IRS for all state and local taxing jurisdictions, indicating whether each category was taxable (indicated by a 1) or not taxable (indicated by a 0) as of July 1, 2025. The contractor shall also provide comparable data on the taxability of any additional Spending Categories in taxing jurisdictions based on research of unique sources for which databases are not currently available.

• A list of spending categories shall be provided by the IRS with this SOW. The contractor shall be informed of any updates to this list during the kickoff meeting.

• The data for State and Local taxing jurisdictions shall be provided in two separate spreadsheets named “2025 state taxability” and “2025 local taxability”.

• The State taxability spreadsheet shall contain data from existing databases for State taxing jurisdictions. This shall be provided in a tab named “UCC State”. The tab shall include the Universal Classification Code (UCC) for Spending Categories in the first column, name of spending Categories in the second column, name of the States as column headings in the first row, and corresponding taxability data in the defined cells.

• The State taxability spreadsheet shall also contain data collected from research of unique sources for which databases are not currently available for State taxing jurisdictions. This shall be provided in a tab named “UCC State Other”. The tab shall include the Universal Classification Code (UCC) for Spending Categories in the first column, name of spending Categories in the second column, name of the States as column headings in the first row, and corresponding taxability data in the defined cells.

• The Local taxability spreadsheet shall contain data from existing databases for Local taxing jurisdictions. This shall be provided in a tab named “UCC Local”. The tab shall include the Universal Classification Code (UCC) for Spending Categories in the first column, name of spending Categories in the second column, name of the States as column headings in the first row and corresponding taxability data in the defined cells.

• The Local taxability spreadsheet shall contain data collected from research of unique sources for which databases are not currently available for Local taxing jurisdictions. This shall be provided in a tab named “UCC Local Other”.

The tab shall include the Universal Classification Code (UCC) for Spending Categories in the first column, name of spending Categories in the second column, name of the States as column headings in the first row, and corresponding taxability data in the defined cells.

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• If the category is taxed at a rate other than the prevailing general sales tax rate, then this shall be indicated in the Excel Spreadsheet with a decimal, which is the unique rate for the category divided by the prevailing general sales tax rate for the jurisdiction. (Note: a key criterion for general sales taxes to be eligible as income tax deductions is that they are applied to a wide range of goods and services at one uniform tax rate. Exceptions to this rule are few and typically require congressional or IRS approval.)

• If the taxability for a category changed near the middle of the year, then this shall be indicated in the data with a decimal, which is the weighted average of the taxability before and after the change, where the weights are based on the number of days in the year during which the category was or was not taxable. For example, a change from taxable to not taxable on July 1 would result in a blended taxability factor of 0.5.

• A separate tab, named “Food Tax Base”, shall be included in the local taxability spreadsheet for localities that have opted to tax food differently from the state. This shall include a list of spending categories for food and the corresponding taxability data. Any notes related to this data shall be provided in another tab named “Notes – Food Tax Base”.

• A separate tab, named “New York Clothing”, shall be included in the local taxability spreadsheet. This tab shall include names of New York local jurisdictions that exempt clothing and jurisdictions that do not exempt clothing.

• The State taxability database shall be delivered electronically to the IRS in an Excel spreadsheet by October 1, 2025.

• The local taxability database is to be delivered electronically to the IRS in an Excel spreadsheet by October 1, 2025.

4. When the taxability data are delivered, information shall also be provided on any significant taxability variation during the course of the year (2025), or a change relative to the prior year. For example, when:

• A State used to have no local general sales taxes, but this year does have one or more localities imposing local general sales taxes, or vice versa.

• A locality used to tax the same categories as the state, but now deviates from the State’s tax base, or vice versa.

• A State used to require a uniform minimum local sales tax for all localities, but no longer does, or vice versa.

5. The contractor shall provide local general sales tax rates for each unique ZIP Code /

County / City combination in the U.S. covering the period January 1 through December 31, 2025.

• This data shall be provided in a comma-separated value (CSV) file and a vertical bar (pipe) delimited text file.

• The files shall be named “2025 STDC” (for “Sales Tax Deduction Calculator”).

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• The files shall not include any duplicate localities—even with slightly different spellings for the city name (e.g., due to abbreviations).

• If the sales tax rate in a given locality changed during 2025, then the rate included in the data files shall be the blended rate (i.e., the weighted average of the rates in effect during 2025, with the weight assigned to each rate preferably being the number of days that the rate was in effect, but the number of months may be used if necessary for these local rates only).

• If a locality is partially within one or more special districts that have different sales tax rates than the area outside of these special districts, all sales tax rates applicable to this locality shall be provided in the database. For example, if a locality has a local rate of 2% and is partially in a special tax district with a local rate of 3%, then the data files shall include two records for this locality, identifying the record for special district with its appropriate name.

• The data files shall include records for Indian Reservations.

• A separate data file named “2025 STDC military”, both in CSV and vertical bar delimited text file, shall be provided that include local general sales tax rates, if any, for each unique ZIP Code in overseas U.S. military zones or districts. The U.S. military zones tend to have no sales tax. The purpose of this data is to account for members of armed forces who moved to overseas posts of duty during part of 2025. Without the unique overseas ZIP Code and tax rates, some military members who moved overseas in 2025 may not be able to use the Sales Tax Deduction Calculator to determine their sales tax deduction amount.

• The data files shall include columns in the following order: 5-digit zip code (including leading or trailing zeros), State (abbreviated 2-character, e.g. NY), County, City, Local Blended Rate (to six decimal places), and State Blended Rate (to six decimal places).

• These files are to be delivered electronically to the IRS by December 9, 2025.

• A list of all possible locality names will be delivered to the IRS in a CSV file and a text file within thirty (30) days of award. If there are any additions or changes to the list, IRS will be provided with updated files by November 30, 2025.

Delivery The following items, mentioned in the Requirements above, are to be delivered to the

IRS.

• List of locality names by October 1, 2025.

• Weighted sales tax rates for US States by October 1, 2025.

• State taxability data by October 1, 2025.

• Local taxability data by October 1, 2025.

• Updated list of Locality names by November 30, 2025.

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• Local general sales tax rates in the U.S by December 9, 2025.

Data files will be emailed to the Contracting Officer’s Representative (COR) and the Technical Point of Contact (TPOC)..

Points of Contact:

COR: To be Determined (TBD)

TPOC: TBD

Place Of Performance The contract will be performed at the contractor’s facility.

Period Of Performance 09/01/2025 – 0/31/2026 Note: The last deliverable date is December 9, 2025. The contractor will be expected to respond to follow up questions from December 9, 2025, to January 31, 2026.

C.8 Government Furnished Property No government-furnished property will be provided to the contractor.

C.9 Security Requirements The contractor will not be using taxpayer-level data, so there are no security requirements for this contract.