Archive for the 'Geocoding' Category

The value of WHERE

Did you know that approximately 70 percent of all business data contains a location component? As the amount of location-related data increases, organizations are finding new ways to capture and analyze this information to strengthen customer relationships and make smarter business decisions—decisions that can plan an important role in your future success.

This month, we are pleased to announce that David Loshin, president of Knowledge Integrity, Inc., will offer his insights and perspectives through a much-anticipated webinar:

Location Intelligence and Data Quality: Gain Maximum Value from Your Business Data

Thursday, December 17, 2009 @ 11AM ET.

There is no cost, but you must register.

Like all data-related procedures, the quality of any location-oriented analysis is dependent on the quality of your underlying data. In this webinar, you’ll learn the degree to which data quality management should and can be integrated with location intelligence and spatial analysis. By looking at the types of data used for spatial analysis and location intelligence, you’ll see what data quality and data cleansing practices can deliver more precise results and more reliable decisions.

Registration is required to join this event, which is brought to you with compliments by Pitney Bowes Business Insight.  Please take a moment to register today.

Are 9-digit ZIP Codes really good enough for sales and use tax jurisdiction determinations?

The vast majority of sales and use tax service/software providers use United States Postal Service (USPS) data to do their geocoding for tax jurisdiction determinations. This means they use 5 digit or 9 digit ZIP Codes to determine if the tax location is inside or outside city limits or a special tax jurisdiction.  This can cause false determinations as postal data, designed to deliver mail, is not designed for use as a business tool for accurate geocoding, particularly with respect to local jurisdiction taxes. This can cause several problems:

  • There are a significant number of residences that do not have mail delivered to the street address (PO Box only) so the USPS does not have that street information in their postal database.
  • ZIP Codes cross city boundaries approximately 30% of the time, resulting in multiple choices for the actual tax jurisdiction.
  • The postal city name can be different than the actual place (municipal) name, i.e.  Thornton, Northglenn, Westminster, and other Colorado cities show as Denver in the USPS database.
  • The USPS does not know or care where a municipal or special tax district boundary occurs

As technology has improved over last several years, these same service and software providers have now moved to the ZIP+4 as a means to reduce the error rate caused by using ZIP Codes. While much more accurate for geocoding purposes, unfortunately, the same issues apply, albeit to a lesser scale. In fact, a number of false positive geocodes may occur. This means you are getting a tax jurisdiction assignment result, but it may be the wrong one because you really need the underlying municipal boundary data to match with the ZIP+4 to be sure the answer is correct. 

Why is the underlying municipal boundary data so important when doing tax jurisdiction assignments? There are just shy of 20,000 cities in the United States and many of them annex more and more territory each year. In 2006, over 4,800 annexations occurred nationally and in 2008 over 6,600 annexations occurred, so the rate of change is increasing significantly. Unfortunately, the tax service providers have no way to keep track of these municipal changes. Also, over 7% of the nations cities do not have mail delivery to homes, and therefore the street address information is not included in the USPS database.

We see the same issue of the rate of change increasing with more and more Special Tax Districts being created each year, many of which do not match up with city boundaries. Further, as allowed under the Streamlined Sales Tax Agreement guidelines, some member states are introducing local taxes where none existed before.

This ever increasing rate of change makes accuracy more important than ever. Using actual street addresses for geocoding provides a more accurate result when coupled with underlying current municipal boundaries, as it returns the correct jurisdiction virtually every time.  Case in point: 11 States now use street address level geocoding on their websites for tax jurisdiction look-ups in recognition of the fact that USPS data just is not good enough to assure the correct answer. They either create and maintain these databases themselves or license the data from third party vendors.

Why do these businesses continue to use USPS data even thought there are known errors introduced? Because it is free.  Given that today’s fiscal environment is causing increased audit scrutiny in many states, free may become very costly.

New laws address taxing problems

Companies are responsible for collecting taxes on behalf of state and local governments, but some industries face more complex rules than others. The insurance industry is one such example.

While all states levy a statewide tax on most forms of casualty, property and health insurance premiums, several states go a step further and allow local governments to apply a separate “local government premium tax” ranging from 2 to 10% on insurance policies to help finance local government services. 

Keeping track of state, local and municipal tax jurisdictions can be a challenge-13 insurance companies doing business in Kentucky discovered that the hard way when they found themselves subject to a class-action lawsuit that cited tax overcharges and violations of state laws.

Many insurance companies rely on ZIP CodesTM to assign applicable tax jurisdictions, however most state and local premium tax assignments in the U.S. are based on specially defined boundaries that don’t necessarily match municipal or ZIP Codes.  Complicating this matter, hundreds of thousands of Zip Codes experience changes in names and boundaries each month. 

Some states are taking action. Under a recent change in state legislation, Kentucky now requires that insurance carriers use a verified geo-spatial database that appends the correct state, county, township municipality and premium tax district information to each customer record. Any insurance provider selling policies in Kentucky must begin using a verified system by January 1, 2010.

To learn more about these issues-including how you can leverage location intelligence technology for accurate, up-to-date premium tax assignments-read the in-depth Pitney Bowes Business Insight white paper on this topic.