My question is simply clarification: when I make a purchase online, is the sales tax applied based on my billing or shipping address?
Possibly similar (possibly illegal?) but with no up-voted or accepted answers: how do i get an out-of-state billing address for a credit card?
From Amazon's Site: "If an item is subject to sales tax in the state to which the order is shipped, tax is generally calculated on the total selling price of each individual item."
I'm going to trust a company of this size has this correct. Shipping address.
Apparently it's based on either the address of the seller or vendor or your shipping address; from the AccurateTax.com blog post Destination and Origin Based Sales Tax:
... a few states have laws that are origin-based, where products that are shipped to the customer are taxed based on the location of the business itself. As of this writing, these states are
- Arizona
- California
- Illinois
- Mississippi
- Missouri
- New Mexico
- Pennsylvania
- Texas
- Utah
- Virginia
Most states use destination-based sales tax, which defines the source of the transaction to be the destination at which the product will eventually be used, or the address to which the product is shipped. ... The following states [and districts] operate on a destination-based model at the time of this writing:
- Alabama
- Arkansas
- Colorado
- Connecticut
- District of Columbia
- Florida
- Georgia
- Hawaii
- Idaho
- Indiana
- Iowa
- Kansas
- Kentucky
- Louisiana
- Maine
- Maryland
- Massachusetts
- Michigan
- Minnesota
- Nebraska
- Nevada
- New Jersey
- New York
- North Carolina
- North Dakota
- Ohio
- Oklahoma
- Rhode Island
- South Carolina
- South Dakota
- Tennessee
- Vermont
- Washington
- West Virginia
- Wisconsin
- Wyoming
The page Do I Charge Sales Tax or Not? from about.com seems to (somewhat) clarify that if the business is located in a state (or other jurisdiction) with an origin-based sales tax, then they will charge you the sales tax for their state and, presumably, not the sales tax for the state of the shipping address.
The technical answer is defined by the laws of state you live in but most (all?) states with a sales tax have some form of use tax. Where if you buy something in another state for use in your home state you are technically liable for sales tax on it regardless of whether the merchant charged you tax on it or not. I don't think many people actually pay the use taxes, and enforcement generally seems rare.
From my understanding as a seller, and having read through Amazon's 8 page calculation methodology document, the default is the ship to address, however the seller still has the option to charge the tax or not, only charge the state rate and local (city, county, district, etc.) rate(s), or even set their own self-determined default tax rate. In other words, the seller has a lot of control in determining what rate they use and the billing and shipping addresses may not even matter. Just remember that whatever tax you pay to Amazon, your state will probably still hold you responsible for calculating and reporting any additional use tax, based on your location. And if the seller does overcharge for tax you may have a right to request a refund from them.
I just made an online order of a cell phone from Best Buy and the state sales-tax that was being applied initially seemed wrong so I contacted them in a "chat." I chatted with 2 different people and both insisted that Best Buy applies sales-tax based on the customer's billing address which is something I had never heard of.
I was having the phone delivered to New York so once I found out they charged based on billing address I called my bank and changed my billing address from my friend's address in Connecticut to my girlfriend's address in Oregon as OR has no sales tax (I am Canadian but use a US billing address for my USD Visa). Best Buy's online order form still did not represent the sales tax as the 0% of Oregon so I chatted again with Best Buy and they told me to place the order and they would refund the sales tax to my original method of payment. They sent me an email confirming that the sales-tax refund is in process and I'm just waiting to make sure that posts to my Visa account (I saved a copy of the chat for proof in case I do not get the refund).
I order a lot of things on Amazon and I always thought that when they did charge sales-tax it was based on the shipping address so perhaps Best Buy is anomalous. Obviously Best Buy has retail stores in every state but maybe it has to do with rules of the state in which the merchant is headquartered.
Your mileage may vary but if you are dealing with Best Buy's online ordering it would seem that this could be a way to avoid sales tax entirely.
