That's an issue I have been running into as well. We decided to do a workaround by adding a little pop up menu when a customer specifies that he is from a state we have nexus in and lets him/her specify if he lives in one of the counties we have to charge a county tax rate for....
...which brings me to the other side of this coin: You only charge localized (county) sales taxes in counties that you have nexus in. (Nexus = you are engaged in doing business in this county). A warehouse you are renting, a sales person working the area and even some lesser engagement constitutes nexus. Lots of info to find on that issue online.
..so once you have determined where you have nexus you should find out what the local sales tax rate is, (BOE - Tax Board of Equalization), and charge the higher tax rate to customers of this county.
There are services out there that provide a real time check on the customer's address against a database that will determine the corresponding county. I once checked into it and turned off by the pricetag I decided to do the workaround for now.
It's a good idea to record the localized and the general sales tax seperately. You'll need those numbers when sending in your sales tax return.
But there are more issues related to this topic that I still can't figure out:
Shipping: That's taxable in some states in not in others. When shipping and handling is charged as one fee, or when shipping is marked up, (and there are a few more less relevant if's), the entire fee is taxable, -excluding Idaho, Massachusetts, New Jersey, and Oklahoma, as these four states do not currently require sales tax on the shipping and handling fee (please don't hold me to this. I had a hard time getting this info and am still not sure it's correct.)
Now what about OOS (out of state) shipments: Sales tax is zero on those, provided you don't have nexus in that state. Does this also apply to shipping? It should, but when I called the BOE hotline, they told me otherwise. I am still hoping they are wrong.
Next issue: We are selling widgets from a fulfillment house in California and for some states we have to sell those via a local wholesaler (due to the nature of our widgets). Are we considrered having nexus in these states only for the widgets that are in our inventory or also for widgets that we are drop shipping from a manufacturer in Washington. I.e. if using the wholeseller in this state constitutes nexus for us, does this also apply to widgets we drop shipping from a manufacturer? I guess since we are charging the credit card for those widgets we could be considered the seller and the fact that we don't hold physical inventory might not be of interest to the BOE when they assess our sales tax obligation.
Or: If we sell these dropshipper's widgets to someone in my home state, I will obviously have to chage sales tax on the widget (or not?), and following the above logic, also on the shipping,- if, and only if, the dropshipper is charging shipping and hanlding as one charge or marking the shipping charge up. Does anyone know whether this is true?
Alternatively, the sales tax on shipping could be based on my shipping charge. I chould be charging only what the drop shipper charges, so now my charge is a shipping only charge and not taxable even though it does contain a handling portion on the drop shipper side. Gulp. I am passing out at this point.
Sorry for the long post.