What Is FIPS? Understanding Federal Information Processing Standards for Tax Data

If you work with US tax data, geographic datasets, or government APIs, you have likely encountered FIPS codes. They are the backbone of reliable county and state identification across federal systems -- and they are essential for accurate sales tax computation.

What Is the Federal Information Processing Standard?

FIPS (Federal Information Processing Standards) are a family of standards developed by the National Institute of Standards and Technology (NIST) for use across US government computer systems. Among these, FIPS 6-4 (state codes) and FIPS 10-4 (county codes) are the most relevant to tax and geographic data.

Each US state is assigned a unique 2-digit code (e.g., California = 06, Texas = 48), and each county within a state gets a unique 3-digit code. Together, the 5-digit state+county code is globally unique within the United States.

Why FIPS Codes Matter for Tax Data

County-level sales tax rates are a core component of the total tax a business must collect. Accurately identifying the county is the first step in determining the correct rate. This is where FIPS codes become critical:

• Unique identification: 31 US counties are named “Washington.” FIPS codes eliminate this ambiguity entirely.
• Cross-system consistency: FIPS codes are used by the Census Bureau, HUD, IRS, and most government data systems, making them the common key for joining datasets.
• Stability: Unlike county names (which occasionally change spelling or format), FIPS codes are stable identifiers that persist across data updates.

Why FIPS Mapping Is Difficult

Building and maintaining a complete, accurate FIPS mapping is harder than it appears:

• ZIP-to-FIPS is not one-to-one. Over 10% of US ZIP codes span multiple counties. Resolving which county applies to a specific address within a ZIP code requires crosswalk data (like the HUD ZIP-County Crosswalk).
• County equivalents vary by state. Louisiana has parishes, Alaska has boroughs, and Virginia has independent cities. Each requires special handling.
• Updates happen regularly. New FIPS codes are occasionally assigned (e.g., when counties merge or split), requiring ongoing maintenance.

How SalesTaxAPI Uses FIPS Codes

The SalesTaxAPI normalizes all county-level data to FIPS codes internally. When you query a tax rate, the API:

1. Resolves the ZIP code to one or more county FIPS codes using HUD crosswalk data
2. Selects the most likely county based on population-weighted ratios
3. Looks up the normalized tax rate data for that FIPS code
4. Returns the rate along with the FIPS code and a confidence score

This gives your application both a human-readable county name and a machine-friendly FIPS code for every lookup -- ideal for both display and data storage.