Drupal Commerce *really* knows how to do conditional sales tax (and VAT). Using the nearly unlimited Rules engine, you can configure various kinds of local sales tax based on the address of the purchaser. This video shows how it's done.

We're expanding on the last screencast that show simple taxes. We're going to go ahead and setup taxes like we just did, but this time we are going to add a conditional Rules application to the checkout.

First, we add a tax rate that is unconditional. Next, we setup a condition that checks the customer profile for a field within the address for our customer. You could choose either the shipping or the billing address (depending on your needs). If you are familiar with rules, you act on an event, then apply actions based on a condition.

You need to work with the "Order address component comparison."

Learn more about Tax Configuration