The ecommerce sales tax Q & A
December 3, 2004 at 08:30 AM
Q. How does an ecommerce site determine if it's going to charge sale tax?
A. If the item being ordered is shipped to the state from which it originates, sales tax is charged.
i.e. The Sales Tax is applied when the merchant is in the same state as the customer's shipping address.
So... some examples:
My ecommerce business is in Washington (WA).
Billed to WA shipped to NY -> no tax
Billed to WA shipped to WA -> tax
Billed to NY shipped to WA -> tax
Billed to NY shipped to NY -> no tax
Billed to NY shipped to UT -> no tax
And naturally, any state you have a presence in becomes a state you must tax.
The rule that few adhere to, is to charge Use Tax on everyone based on their local tax code.
Use Tax is applied when the merchant is in a different state than the customer. I'll start thinking about doing this when Amazon does.
https://thestc.com/RateCalc.stm (nice calculator)
Well, looks like you've got the rules right. But boy, what an incredibly simple representation of them. For example, if it's shipped to WA, what part? Seattle, Renton, Spokane, etc.?
Once you determine which area, you've got to figure out state, city, municipality sales tax rates...
i.e. it IS a mess like you indicate.
Posted by: Michael K. Campbell | December 03, 2004 at 09:54 AM
Right... But my understanding is that I charge the tax based on the tax code from where the package originates... i.e. in my case, Spokane tax code, regardless of where in WA it ships. Do you know differently?
Posted by: Carson McComas | December 03, 2004 at 09:56 AM
Nope. It's just the INVERSE. If it gets shipped to NY, and if you have to charge tax (i.e. because you have a presence there)... then it's your job to figure out the exact tax rate based on state/city/municipality/whatever.
That's what makes online sales tax such a joke.
Posted by: Michael K. Campbell | December 03, 2004 at 10:03 AM
Wow, so if I ship from Spokane to King county (Seattle) I've got to charge King County Tax? Perverse! No one is doing this though... at least none of my clients :)
And I know they aren't alone.
Ok... more research warranted...
Posted by: Carson McComas | December 03, 2004 at 10:13 AM
Ok lets say I am opening an ecommerce bus. now how do I not pay sales tax on the product I am buying and then selling?
Posted by: izaak | March 06, 2008 at 12:41 PM