Comments on: Should Your Online Store Be Charging Tax On Shipping And Handling?

By: Erik

Erik — Sat, 05 Dec 2009 19:13:58 +0000

The sad part is that the consumer doesn’t know when a tax on shipping is legitimate or not. If the “tax” collected on a shipping charge is not ultimately forwarded to the state tax board and is instead retained by the seller, then in legal terms, the seller has been unjustly enriched.

In some states, shipping charges are generally not taxable, but “handling” charges are. Sometimes, sellers will not charge any handling charge, and nevertheless collect “tax” on shipping. One has to wonder whether that “tax” revenue ever makes it to the tax board, or whether it goes into the pockets of the sellers.

One example of when a seller may have an incentive to pocket “tax” money is on some auction sites in which the actual item might sell for literally a penny, with let’s say a $2 shipping charge. Even when the seller does not charge handling, there is an incentive to “tax” the full $2.01, instead of taxing only the $0.01, and to then keep the extra “tax” collected above the tax on the sales price.

By: Jill Olkoski

Jill Olkoski — Wed, 14 Oct 2009 18:25:34 +0000

From what I understand, if you buy something wholesale with the intent of reselling, there’s some form or notification that allows your purchase to be without tax. In that case, there is no tax because it would be paid by the person you sell it to. But if you’re buying it for your own use, and not for resale, then I’m not quite sure what the rules are. It would make sense to me that in you might pay full retail tax, because that’s what would be collected if it were sold. But then again, I really don’t know, because I don’t buy anything wholesale for resale. It certainly could be a mistake. I’d do more Googling.

By: Kathryn

Kathryn — Wed, 14 Oct 2009 18:16:02 +0000

I’m paying wholesale for Mary Kay products, but being charged tax on the retail price. Is that right?

By: Alan

Alan — Fri, 11 Sep 2009 17:54:39 +0000

Sale Tax is for tangible items, products or goods that you buy to own.

Use Tax is for business or consumers who buy intrastate tangible item(s), product(s) or goods and don’t pay taxes on the tangible item(s), product(s) or goods they bought at wholesale, then using these intrastate tangible item(s), product(s) or goods within the state for their own use.

Services Tax is a tax that a business pays (not the consumer) on services they provide. Examples of services are: Warranties, Cell phone services, telephone service, labor, installations, repairs, and etc. Now this don’t mean that businesses will adhere to this. Some businesses will charge the sales tax in order to avoid paying a higher B&O tax and no service tax at all. This is not legal, but they still do it and get away with it. Some Big Companies like AT&T, Sprint, Qwest, DELL, Hewlett Packard, and others charge sales tax on services. These services include telephone service, cell phone services, and warranties.

About 20 years ago I purchased two car warranties and was charged sales tax on these warranties. Well, someone filed a class action lawsuit about this practice. It went to court in Thurston County and after it was all said and done with, the court found it was unconstitutional to charge sales tax on services. The State of Washington and the businesses that charged the sales tax ended up having paying back everyone back that filed a claim and had paid sales taxes on their warranties.

The attorneys who sued made out like bandits, the State of Washington paid out millions in legal cost not to mention the sales taxes they had to give back, the business where held accountable for service and B&O taxes that they did not remit to the State of Washington, and the consumer well they gained back a fraction of their taxes. I was paid the sales tax back on only one of my warranties

By: Leiter

Leiter — Mon, 30 Mar 2009 22:06:46 +0000

Wow, thanks for posting this.
I personally think it’s bogus that Washington (and other states) charge sales tax on the delivery of items. You would think that with the number of online businesses based in this state, specifically in the Seattle area, they would try to make it easier to conduct business within the state. I also think it’s unfair to charge a sales tax on digital purchases since I don’t have the right to transfer the license of those items in a resale capacity (for example, with music downloads).

By: Jill Olkoski

Jill Olkoski — Wed, 10 Dec 2008 17:13:48 +0000

Hi Daniette,
Yes – but many states are similar. Being in Washington, I get charged tax whenever I buy from Amazon.com, since they’re in Washington too. But on the flip side, the purchases arrive super quick – so maybe it’s not all bad.

By: Daniette

Daniette — Wed, 10 Dec 2008 08:52:25 +0000

Thanks for this info. I was wondering why Best Buy was charging me tax on shipping & wondered if this was legal. Well only in Washington. I guess I should thank my legislature. Grrrr….