As an online seller, from time to time you’ll get questions from buyers about sales tax. Online sales tax is still a bit of a wild west, and some customers will have certain expectations about the amount you charge them.
“Why did you charge me sales tax?” or “Why didn’t you charge me sales tax?”
As an online seller, you are only required to collect this amount from buyers in states where you have sales tax nexus. However, many buyers don’t quite understand this. Often, they think that they should only be charged if the address from where the product is shipped is in their state. They often don’t understand that you may have sales tax nexus in other states due to having other locations, employees, warehouses or other factors that mean you’re required to collect this tax in their state.
If a customer asks why they were charged, explain that your business has a nexus relationship with the buyer’s state and thus you are required to charge them this tax.
In the rare case that a customer questions why you didn’t charge them, you can simply tell them that you are not require by the laws of their state to collect it.
“I had a gift shipped to a friend in a different state. Why was I charged sales tax?”
Many customers don’t realize that when charging sales tax on an online order, the rate is based on the item’s “ship to” address. Maybe they are accustomed to buying from you tax free, but then have an item shipped to a state where you have a nexus and thus are required to charge the tax.
In this case, you can explain that, with eCommerce, the point of sale is considered to be the address where the item is shipped, and you have an obligation to collect it in the state where you shipped the product.
“You charged me a slightly different rate than I usually pay when I buy from a store in my town. Why?”
Most of the time, a customer would pay the same amount of sales tax when making a purchase online as she would when buying the same product at her local store. But in some states, like Texas, only sellers are only required to collect the rate at their business location. This is because Texas is an “origin-based” sales tax state.
Example: Trudy lives in Marathon, TX where the rate is 6.75%. When she buys something at her local store she pays the 6.25% sales tax on her purchases. But she makes an online purchase from Joe who lives in Irving, TX where the rate is 8.25%. Since Texas is an “origin-based” state, Joe would charge Trudy the 8.25% sales tax rate from his location in Irving. And in this case, Trudy would pay a bit more than she is accustomed to.
(Note: To make matters even more confusing, this is generally only applicable when the buyer and the seller are located in the same state. Click here to read a whole lot more about origin-based and destination-based sales tax collect for online sellers.)
If your customer asks why you collected more (or a different amount) than expected, you can explain that your state’s laws require you to collect the rate of combined state, county and other local sales tax at your business location.
For answers to more consumer questions, check out the Consumer’s Guide to Sales Tax. And feel free to send this to customers who have in-depth tax questions so you can get back to doing what you do best, running your eCommerce business!
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