Amazon Charges Sales Tax On "Shipping and Handling"

You may have noticed that retailers like Amazon are charging tax, in compliance with state laws, on not just the price of goods, but on the "shipping and handling" fees they charge. An anonymous reader writes "By coincidence I noticed this myself the other night, and ended up ordering something from a supplier in Arizona, rather than Amazon, to avoid the sales tax. Now here is an article about it in the Los Angeles Times."

Buy Amazon Prime.

[Anonymous Coward]

Problem solved.

sales tax is always on the FULL PRICE

[alen]

in some states you even have to pay sales tax on the full $649 price of a smart phone

sales tax is on GOODS AND SERVICES

are slashdotters really that dumb not to realize this?

Re:Outrage!

[Anonymous Coward]

Well, in California, you must collect taxes on Shipping if you're charging more than the actualy cost of shipping, or you don't keep detailed shipping cost-records. So, the flat-rate $4.99 shipping option in California, according to the BoE is fully taxable.

Re:Buy Amazon Prime.

[Prosthetic_Lips]

False. The sales tax laws are very specifically worded, anything collected (even if in excess of what you were supposed to collect) is required to go to the states. Unless the rules are different since Amazon is out-of-state? I have looked into Florida laws, and even if I were to collect double what I was supposed to, I couldn't keep a penny (legally).

Bad Summary

[doug141]

Summary should have summarized it's the law. "According to California's sales tax collection agency, the Board of Equalization, sales tax should be collected when a seller "makes a combined charge for 'shipping and handling' or 'postage and handling,' " if the invoice does not show the actual cost of the individual delivery."

Re:Is shipping

[nedlohs]

You are a special kind of stupid.

Re:Was the handling charge really for handling ...

[Sir_Sri]

This is why the EU has a value added tax. It doesn't matter how the value was added to the product, it's taxable. This conceptually makes sense if you consider the basic unit of value is labour - labour is used to extract the resources that make things, and to convert the resources into other things. So any use of labour can be taxed.

In north america we have various 'goods' taxes, (usually provincial or state taxes), but some are goods and services taxes. Varies a lot by place.

It's the law in CA

[kenh]

Have a look at this FAQ entry on the California Board of Equalization website:

Are delivery and handling charges taxable?
Delivery charges.
You have the property delivered directly to your customer using a common carrier, the U.S. Mail, or an independent contractor

Tax does not apply to the delivery charges under these conditions if the charges are clearly stated as a separate entry on the invoice or other bill of sale. If the delivery charges are not stated separately, they are taxable.

Example.

You sell a refrigerator and have it delivered by an independent contract carrier. On the invoice, you show a $750 charge for the refrigerator plus a separately stated $50 charge for delivery (the amount charged you by the carrier). Since the delivery charge is stated separately, tax applies only to the charge of the refrigerator ($750). If the invoice had shown a single charge of $800, tax would apply to the entire amount.

Note: If you charge more for delivery than your actual costs, the added amount is subject to tax. In the example above, if you had charged your customer $60 for delivery, but your actual delivery cost was $50 (the amount charged by the independent contract carrier), tax would apply to the additional $10 charge.
You use your vehicle to make the delivery

Tax applies to the delivery charges if you use your own vehicle, whether or not those charges are separately stated on the invoice.

Example. You sell a refrigerator and deliver it to your customer using your own vehicle. On the invoice, you show a $750 charge for the refrigerator plus a separately stated $50 charge for delivery. Tax applies both to the delivery charge and the charge for the refrigerator.

Note: Tax does not apply to delivery charges using your own vehicle if there is a written contract of sale, signed before delivery, that transfers ownership of the property to the purchaser prior to delivery.

Handling charges. Handling charges are generally taxable.

Combined charges. If you charge a single amount for delivery and handling (for example, the invoice shows a single amount for "postage and handling" or "shipping and handling"), the portion of the charge that represents handling is generally taxable, while the portion that represents delivery may or may not be taxable.

Note: It is important to use terms such as "delivery," "shipping," or "postage" on the invoice to represent delivery charges. A separately stated charge that says only "handling", for example, is not considered a delivery charge and the entire handling charge is taxable--even if postage or shipment charges are indicated on the package.

For more information on delivery charges, or information on how tax may apply to a specific transaction, please see Regulation 1628, Transportation Charges or publication 100, Shipping and Delivery Charges. You can also contact the Board's Information Center 800-400-7115 or your nearest Board office.

http://www.boe.ca.gov/sutax/faqpurch.htm#10 [ca.gov]

Re:Buy Amazon Prime.

[Anonymous Coward]

Further, ALL collected sales taxes, whether lawfully, legally collected or not, or even ifthey are collected in error, MUST be remitted to the state.
Shipping and handling is exempt from sales tax in California but if it is collected, it MUST be sent to California. If they don't, it is tax fraud and they could face stiff penalties, and lose their reseller's permit, preventing them from selling to California addresses.

A lot of businesses collect sales tax for all sales, including tax-exempt sales. Do they remit those taxes? Probably not.

Then pay for faster shipping

[Sycraft-fu]

Their shipping rates are competitive with other online companies. You seem to be complaining that they won't both comp you shipping and do it quickly. Well given that I don't know anyone else that does that, it seems reasonable they don't. Amazon just offers lots of options:

1) Free shipping that is slow. They note it can take a number of days. However, you don't have to pay anything extra for it.

2) Per shipment faster paid shipping. They have all the regular options, up to next day. You pay based on size and weight, like with most retailers, and get your shipment in the specified time.

3) Prime. Yo pay a yearly fee to get two day shipping on all items (even pretty large and heavy ones) and have the option to upgrade any item to one day for $4/item. Often even the 2 day items arrive in one day, though they don't guarantee it.

Sounds damn reasonable to me.

Re:Buy Amazon Prime.

[Sentrion]

In many states, companies that collect sales tax are allowed to keep a portion of the tax collected. In fact, they HAVE to keep a portion of the tax collected to remain compliant with most state laws. It's just a fraction, but it is meant to "reimburse" the company for going through the trouble to collect the tax in the first place. If tax is collected when it wasn't due, then the retailer is supposed to refund that money back to the customer. If you buy from a retailer that doesn't charge you sales tax then it is presumed to be your duty to files a state sales tax return to "voluntarily" pay the sales tax yourself directly. Technically you could save a fraction of a fraction by setting up yourself or your company as "self pay" for sales tax. You'll typically need a certificate and a statement, then you can buy tax free and file your own state sales tax return. I've known a few companies that do this, as it can make sense both to save a small portion (the amount the retailer would get to keep) and to keep your company compliant when so many retailers do not collect sales tax or charge the right amount. Staying on top of what percent tax is for each and every zip code and for each and every type of product for each and every state and territory can get even big online retailers bogged down.

Re:Buy Amazon Prime.

[Miamicanes]

> Don't forget unlimited $4 overnight. Do that once with a computer case and it pays for itself.

Or a generator. I have friends who literally bought a generator with prime shipping as a hurricane was making landfall, and had the generator on their front porch the following afternoon (obviously, they lived in an area where the power lines went down, but there was no major flooding or destruction).