ebooks and sales tax from the WSJ

[Fbone]

Originally Posted by Andrew H.

As mentioned below, we typically don't pay sales tax on services. If you get work done by a plumber, there will be no tax on the labor, but you will have to pay tax on any parts he provides. Same is true at a car repair shop.

Most states that charge sales taxes specify that it applies to tangible and intangible goods...but some states only apply it to tangible goods.

I think the most confusing area is groceries. Most states (I think) don't charge sales tax for groceries, but what counts as "groceries" varies widely, with ready-to-eat food typically being charged tax...although what ready-to-eat food is can be complicated, too. In my state, toilet paper is taxed, but I've been to states where it isn't.

Evidently, this varies widely by state.

We pay sales tax on labor performed by a plumber and mechanic. Even shipping charges are taxed. Digital goods are taxed also.

[John F]

Originally Posted by shalym

Hmmm...It's news to me that digital content is exempt in Connecticut. I live here, and I am definitely getting charged sales tax on Kindle books.

Shari

I'm from CT also, and I wasn't charged sales tax on my Kindle book purchases (unless something has changed, the last time I ordered was in 2011). I also haven't been charged sales tax by Kobo.

[shalym]

Originally Posted by John F

I'm from CT also, and I wasn't charged sales tax on my Kindle book purchases (unless something has changed, the last time I ordered was in 2011). I also haven't been charged sales tax by Kobo.

I bought this last week...and was charged sales tax.

Shari

[John F]

Originally Posted by shalym

I bought this last week...and was charged sales tax.

Shari

That looks like a strange "sales tax" for CT. Isn't the sales tax 6.5%, so shouldn't the tax be $0.65?

[TimW]

Originally Posted by John F

That looks like a strange "sales tax" for CT. Isn't the sales tax 6.5%, so shouldn't the tax be $0.65?

Really...I'd be thrilled with 1%. I've paid 6% on Kindle books since I began purchasing them two years ago. I don't even want to know the total...

[shalym]

Originally Posted by John F

That looks like a strange "sales tax" for CT. Isn't the sales tax 6.5%, so shouldn't the tax be $0.65?

It is a strange amount, and I don't know why I'm being charged it, but it is definitely listed as a "tax", and I always assumed it was a sales tax, without even doing the math to see if it added up correctly. Now that I have, it's even more confusing--just what IS this 1% "tax" I'm being charged???

Shari

[shalym]

Ok...so looking on Amazon's site I found this:

http://www.amazon.com/gp/help/custom...=468512#select

Sales Tax on Items Purchased from Select Amazon Sellers

The following is a partial list of merchants selling items at Amazon.com which may be included in your order, and the states in which they charge sales tax:
Sold by: States in which tax is charged:
Amazon.com LLC KS, KY, ND, NY, TX and WA
Amazon Digital Services, Inc. KS, KY, ND, NY, TX and WA
Electronic Arts, Inc. All States except for AK, DE, ID, ME, MS, MT, ND, NH, NM, RI, SD, VT, WV, and WY*
Magazine Express, Inc. AL and WA
New York Times, Inc. AL, DC, KY, and NY*
Synapse Services, Inc. WA only
Hachette Digital, Inc. AL, AZ, CO, CT, DC, HI, ID, IN, KY, LA, ME, MS, NC, NE, NJ, NM, SD, TN, TX, UT, VT, WA, WI and WY*
Harper Collins Publishers, LLC All States*
Penguin Group (USA) Inc. All States*
Simon & Schuster Digital Sales, Inc. All states other than AK, DE, MT, NH, and OR*
Macmillan AZ, CO, CT, DC, HI, IN, KY, ME, MS, NC, NE, NJ, NM, SD, TN, TX, UT, VT, WA, WI and WY*
Dow Jones & Company, Inc. AZ, CT, DC, HI, ID, KY, NC, SD, and TX*
Zondervan Corporation LLC All States*
Random House Digital, Inc. All States*
* Kindle books, subscriptions and active content titles sold by various publishers are subject to sales tax based on the publisher's tax reporting obligations and the taxability of digital books in those regions. As a result, sales tax for Kindle books sold by the publisher may differ from the sales tax to which you've been accustomed for Kindle products.

So it appears we are already being charged tax if we buy from one of the big publishing houses. What happens when the states start tacking on their sales tax? Will I, in CT start having to pay 7.5% tax now? (CT sales tax rate of 6.5% plus the 1% I'm already being charged)

Shari

[HarryT]

Originally Posted by shalym

So it appears we are already being charged tax if we buy from one of the big publishing houses. What happens when the states start tacking on their sales tax? Will I, in CT start having to pay 7.5% tax now? (CT sales tax rate of 6.5% plus the 1% I'm already being charged)

Shari

That would be a good thing, surely? It'll save you the effort of having to declare the purchase yourself on your tax return, won't it?

[bevdeforges]

The confusing thing about VAT in Europe is that, normally, you're charged VAT based on where the merchant is located. But for e-books (which are considered computer files rather than "books" for tax purposes - I suppose that's like being considered a "service"), you pay VAT based on where the customer resides. In the case of services, you are supposed to pay VAT based on where the services were performed, so I guess the analogy is logical.

What has been annoying is seeing all the fuss Amazon has been putting up back in the US about refusing to charge the appropriate sales tax (i.e. by customer residence) when they seem to have a very effective and efficient system in place for charging the correct VAT to those of us buying e-books from abroad. And apparently Kobo has something similar since they sell to a wide range of countries around the world.

[shalym]

Originally Posted by HarryT

That would be a good thing, surely? It'll save you the effort of having to declare the purchase yourself on your tax return, won't it?

Right now my state doesn't tax digital downloads, so I don't have to declare anything for them. The legislature is considering changing the law to collect tax on digital downloads in the future, though. My question is, will I then be charged both taxes?

Shari

[murraypaul]

Originally Posted by bevdeforges

The confusing thing about VAT in Europe is that, normally, you're charged VAT based on where the merchant is located. But for e-books (which are considered computer files rather than "books" for tax purposes - I suppose that's like being considered a "service"), you pay VAT based on where the customer resides.

I don't think that is correct, otherwise Amazon couldn't charge the lower Luxembourg VAT rate on eBooks sold to the UK.

[Daithi]

Right now I don't pay taxes on purchases through Amazon. Online purchases are treated the same as if you had bought an item from a sales catalog. The company selling the item does not have to collect taxes, or pay taxes to a state, unless the selling company has a "presence" in the state. In fact, the Supreme Court has ruled that states CANNOT require companies who don't have a physical presence in their state to collect and pay them taxes (Quill Corp. vs. North Dakota). Just because a catalog company sends you a catalog doesn't mean it has a presence in your state. Just because Amazon has an Internet presence doesn't mean it has a physical presence in a state. A state can only make a company pay tax if they have some kind of brick and mortar, or legal, presence in that state.

However, it appears that the federal government is considering changing the law so that items bought over the internet will require the selling company to collect sales tax based on where the item is shipped. The legislation is called the Marketplace Equity Act (H.R. 3179), and, oddly, it is actually supported by Amazon.

[cjr72]

Originally Posted by Daithi

However, it appears that the federal government is considering changing the law so that items bought over the internet will require the selling company to collect sales tax based on where the item is shipped. The legislation is called the Marketplace Equity Act (H.R. 3179), and, oddly, it is actually supported by Amazon.

Well as some posters above have pointed out Amazon seems to be changing their strategy from a few distribution centers in a few states so they can avoid collecting sales taxes for the rest, to many distribution centers in many states so they can begin doing same day delivery. It may be a case of be careful what you wish for on the part of brick and mortar stores who have been moaning about Amazon's sales tax advantage.

In Texas where I live they have begun collecting sales tax and on a couple of things that I have ordered they have shown up unexpectedly early on the next day. I don't know if that is related or just a coincidence.

[Kali Yuga]

One thing to keep in mind is that it really isn't that difficult for online vendors to collect sales tax. It's child's play for a company like Amazon to include a sales tax system in their databases; they've already got it.

Smaller online vendors typically use 3rd party services for payment processing. Companies like that can get sales tax updates for less than $50/month.

By the way, many services do collect sales taxes. Back in the day when people rented videos you had to pay sales tax.

There are also some physical goods which are exempt. E.g. clothing sales in NYC under $110 do not have to pay sales tax.