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Businesses Government The Almighty Buck

Amazon Charges Sales Tax On "Shipping and Handling" 330

Posted by timothy from the not-just-shipping-mind-you dept.
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."
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Amazon Charges Sales Tax On "Shipping and Handling" More

Amazon Charges Sales Tax On "Shipping and Handling"

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  • Buy Amazon Prime. (Score:5, Informative)

    by Anonymous Coward on Sunday November 04, 2012 @06:23PM (#41875479)
    Problem solved.

    • Re: (Score:2, Insightful)

      by Anonymous Coward

      Yes, continue to support a company that has shown it will gouge you all it can. Brilliant plan.

      • Re: (Score:3, Insightful)

        by alen ( 225700 )

        $80 a year for "free" books and streaming media and 2 day shipping is gouging?

        • Re:Buy Amazon Prime. (Score:5, Insightful)

          by neo8750 ( 566137 ) <zepski&zepski,net> on Sunday November 04, 2012 @07:19PM (#41875943) Homepage
          Way i see it is netflix is 8 bucks a month 8*12 = 96. Where with amazon prime its 80 and i get free shipping on my amazon purchases.

        • Re:Buy Amazon Prime. (Score:5, Insightful)

          by Lumpy ( 12016 ) on Sunday November 04, 2012 @07:51PM (#41876153) Homepage

          But if you dont do it the y PUNISH you by delaying when your package ships. I have had orders sit unshipped for 5 days with them, when I ask about it I was told that "to avoid this get a prime membership"

          • Re:Buy Amazon Prime. (Score:4, Insightful)

            by Anonymous Coward on Sunday November 04, 2012 @08:08PM (#41876245)

            It's not punishing, it's exactly what they told you they would do. If you choose free shipping, they say your stuff will be delivered in 5 to 8 business days. Given the abundance of their warehouses and ridiculously low shipping times, you should have received your order within 8 business days, so, they were within their right to delay your order to get more profitable (paid shipping and prime) orders out of door first. If you didn't get it on time, that's a different story.

          • Then pay for faster shipping (Score:5, Informative)

            by Sycraft-fu ( 314770 ) on Sunday November 04, 2012 @09:43PM (#41876783)

            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.

      • s/company/state/

        You do realize that amazon doesn't get to keep the sales tax, right?

        • Re: (Score:2)

          by swalve ( 1980968 )
          Sure they do. At the end of the month, they tally up the total of the things they sold and send a check for the appropriate amounts to the state(s). They keep the excess tax they charged on things for which they aren't required to reimburse the state.

          • Re:Buy Amazon Prime. (Score:5, Informative)

            by Prosthetic_Lips ( 971097 ) on Sunday November 04, 2012 @07:51PM (#41876155) Homepage
            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).

        • Re: (Score:2)

          by unitron ( 5733 )

          s/company/state/

          You do realize that amazon doesn't get to keep the sales tax, right?

          After they add all the sales together and pay the state whatever the sales tax percentage is on the total, there's probably some left over.

          Long ago in a childhood far away when there were such things as 10 cent candy bars and comic books, NC had a 3% sales tax.

          Buy a candy bar and a comic book, pay 21 cents.

          Do it 5 times, pay $1.05

          Store reports $1.00 in sales to state, pays them 3 cents, keeps 2.

          • Re:Buy Amazon Prime. (Score:4, Interesting)

            by Relayman ( 1068986 ) on Sunday November 04, 2012 @08:44PM (#41876445)
            The merchant is required by law to account for all money collected as sales tax separately from the amount of the sale and to remit all sales tax collected to the state. If the merchant collects less than is required based on the sales, then the merchant has to make up the difference. To not remit all money collected as sales tax to the state is illegal.

            It's possible that North Carolina is different than the Midwestern states which I'm familiar with, but I doubt it.

            • Re:Buy Amazon Prime. (Score:4, Informative)

              by Anonymous Coward on Sunday November 04, 2012 @09:38PM (#41876755)

              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.

        • Re: (Score:2, Insightful)

          by Anonymous Coward

          FALSE. Or at least potentially false. All California sales tax paid by Amazon will be directed to Patterson and San Bernardino where Amazon is building warehouses. These cities are/were planning to rebate 75%-80% of the sales back to Amazon.

          From the LA Times:

          "San Bernardino and Patterson, where the centers will be located, will gain not only jobs but also a tax bonanza: Sales to Amazon customers throughout California will be deemed to take place there, so all the sales tax earmarked for local government operations will go to those two cities....

          [Patterson] City Manager Rod Butler said the city is considering rebating as much as 75% of its share of sales-tax revenues to Amazon. He reasons that even a reduced share of those taxes would enable the city to balance its budget and pay for city parks, streets and garbage collection....

          San Bernardino, meanwhile, is working on an agreement with Amazon that would give the retailer as much as 80% of its share of sales taxes in the first few years, according to city spokesman Jim Morris."

          California lawmakers have ensured that Californians pay more for everything on Amazon, and that Amazon gets to keep the money as extra profit. Can't legislators just leave us alone? :P

          Source:
          http://articles.latimes.com/2012/may/19/business/la-fi-amazon-

      • Re: (Score:2)

        by XaXXon ( 202882 )

        Huh? Not sure what you're talking about.

      • You get all of my imaginary mod points.

      • Re: (Score:3, Insightful)

        by meerling ( 1487879 )
        The company that is gouging you for the sales tax is California. Amazon fought the sales tax for online purchases for years, it's over, by law they have to charge you. Sucks, doesn't it, but don't worry, there are other reasons you can still use to complain about Amazon with. :)

    • I wonder if you also have to pay tax on Prime? It's main function is to cover shipping & handling for all orders, I cannot see why it would not count. But since it's not part of any one order, perhaps it does not..

      • I wonder if you also have to pay tax on Prime? It's main function is to cover shipping & handling for all orders, I cannot see why it would not count. But since it's not part of any one order, perhaps it does not..

        Yes, you pay sales tax on Prime subscription (I subscribed just after my state's "agreement" with Amazon kicked in and was charged). It is an order in itself.

      • Re: (Score:2)

        by lsllll ( 830002 )

        I don't know. I just tried to order something and during the checkout process there was NO tax added. I am using Amazon Prime. I wonder if Amazon will lower its prices if it ends up charging taxes. I am a democrat and am not opposed to more taxes. In a way more taxes could help things.

        Here's how I see it. Amazon is all of a sudden forced to charge sales tax on out of state purchases, while it'll be a few years before smaller businesses will have to charge sales tax. Meanwhile, some people will floc

    • Problem solved.

      Except you end up paying sales tax on the prime subscription. OTOH you probably would be expected to pay 'use tax' if sales tax isn't charged so the only difference (assuming your tax return is a true statement) is whether you pay when you order or pay in April.

      Either way, the state gets its cut.

    • Re: (Score:2)

      by antdude ( 79039 )

      Amazon Prime is useful for those who buy a lot from Amazon. Not good for those who rarely buys from Amazon like me. :(

  • not a sale for a service?

    I pay sales tax when I get my oil changed for both the oil and the labor.

  • sales tax is always on the FULL PRICE (Score:4, Informative)

    by alen ( 225700 ) on Sunday November 04, 2012 @06:27PM (#41875527)

    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: (Score:3)

      by mkraft ( 200694 )

      Not in California, which is where the buyer was.

      http://www.boe.ca.gov/pdf/pub100.pdf [ca.gov]

      • Re:sales tax is always on the FULL PRICE (Score:5, Insightful)

        by PPH ( 736903 ) on Sunday November 04, 2012 @06:53PM (#41875735)

        And now you see why small businesses don't like to have to collect taxes for hundreds of different taxing jurisdictions. When they aren't located there, are much smaller than Amazon and can't afford a tax compliance department staffed with accountants and lawyers. Yeah sure, you could do business as a 'associate' of Amazon and have them handle tax compliance for you. But now you're their bitch and they can dictate other aspects of your online existence.

        Wave good by to innovation.

        • Re:sales tax is always on the FULL PRICE (Score:4, Interesting)

          by Mr. Slippery ( 47854 ) <tms&infamous,net> on Sunday November 04, 2012 @07:24PM (#41875985) Homepage

          And now you see why small businesses don't like to have to collect taxes for hundreds of different taxing jurisdictions.

          Most small businesses don't. They collect sales taxes in the jurisdiction where they are located. If I (in Maryland) sell you something by mail, I collect tax if you're in Maryland, or no tax if you're not. You might owe use tax, but that's Not My Problem.

          In New York, where it's a destination tax, a merchant located there has to collect for a few dozen jurisdictions -- a pain, but far from "thousands".

          It's a problem for too-big businesses such as Amazon that have "nexuses" of business all over the place; screw them, companies shouldn't be that big.

          But it can be a problem for small companies that provide a venue for merchants in many different locations.

          • Re: (Score:3)

            by Sir_Sri ( 199544 )

            but far from "thousands".

            Add in the EU, which is like the US, but with potentially one extra layer of government, since the EU has local, provincial (your "State"), Federal and EU level rules, and there are 27 federal governments, with god knows how many provinces etc.

            And then there's india, china, japan, south america etc.

            Web businesses essentially do business with potentially every country in the world, and that can be a nightmare, because your local rules for dealing with every country can be different, and you may only need to

          • screw them, companies shouldn't be that big.

            Why not? Scale brings efficiency; there's a reason why they grow that big in the first place, you know.

            • "Why not? Scale brings efficiency"

              And also monopoly and anti-competitiveness. In the real world things aren't so rosy.

              • Sure, which is why we have the state to keep monopolies in check, and crack down on anti-competitive business practices. In this particular case, there's no reason why we can't have the cake (efficiency of scale), and eat it too. I'll grant you that US government is not particularly good at keeping large companies in check, but that's the problem with that government, not with the arrangement in general - it works just fine elsewhere.

          • It's a problem for too-big businesses such as Amazon that have "nexuses" of business all over the place; screw them, companies shouldn't be that big.

            An interesting sentiment. Why not?

        • Re:sales tax is always on the FULL PRICE (Score:4, Insightful)

          by Tokolosh ( 1256448 ) on Sunday November 04, 2012 @08:07PM (#41876237)

          Amazon loves this complicated and convoluted system - it raises the barriers to entry of competition.

        • This really needs to be run by the government. Rather than make it the responsibility for every company out there to collect sales tax info from every jurisdiction in the country, the Federal government needs to set up a web site. The jurisdictions update the site with their current sales tax info every day (or week). Businesses then just download the tax tables from the site at the start of the business day (or week).

          Yes there are companies that collect all the sales tax rates throughout the country,
        • Actually, charging sales tax on shipping and handling is designed to simplify taxes. In some states, S&H was taxable and others it wasn't. Under the simplification, it's taxable everywhere.

          If this is stifling your innovation, you need a new line of work.

          • Collecting sales tax on S&H isn't what he was referring to. He's saying that forcing small businesses / bootstrapped startups to collect sales tax for every region of the country will stifle innovation by raising the barrier to entry so high that most people won't be able to enter the market.

    • Re: (Score:3)

      by hduff ( 570443 )

      Not in Virginia; no sales tax on services.

    • Just to add to this, the shipping and handling is actually the source of profit for many companies on Amazon. I personally knew the owner of a company that sells $0.99 computer games on Amazon, but charges $5.99 shipping on them, which turns into a $5-plus profit on each game sold. I recently fell for this tactic when I bought a copy of the Hulk Video Game [amazon.com] for $3.96 and got charged $4.59 in shipping. This is also the case with many used-book sellers on Amazon, who sell the book for a dollar, charge you five

  • This is the correct behavior (in most states). Hate it? Me too. Bitch at your local government person.

    • Re: (Score:3)

      by Dahamma ( 304068 )

      Unfortunately, it's also the correct policy by the state governments to tax shipping and handling. Otherwise mail order purchases would all go the way of TV-infomercials where the product is like $5 with $20 "shipping and handling"...

  • Outrage! (Score:5, Insightful)

    by White Flame ( 1074973 ) on Sunday November 04, 2012 @06:32PM (#41875569)

    After all the outrage in the Apple tax thread, everyone should stand for paying their fair share of sales taxes, not dodging them by ordering out of state from somebody they normally wouldn't.

    • Re: (Score:2, Flamebait)

      by alen ( 225700 )

      apple is evil, amazon is not

    • Er, no body is complaining about paying taxes. They are complaining paying extra taxes for shipping and handling. In california, there is no tax on services. People have every right to complain about Amazon charging sales taxes on things, the state does not want it to.

      • Re: (Score:3, Informative)

        by 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: (Score:3, Interesting)

        by Anonymous Coward

        Yes I am complaining about paying taxes in California. We used to be able to build roads and school our children on a 6% sales tax. California employees were allowed to unionize under Jerry Brown and since then there has been a steady drumbeat of tax increases to keep California government growing and public employees living large. In a few years we will have 20,000+ California retirees living like lottery winners with 100k+ pensions (with automatic inflation increases) and lifetime gold plated health bene

        • Since I know nothing about California's state finances, I'm curious, what percentage of the state's employees are receiving 100k+ pensions? Are the $100k+ pensions outliers used to incite people or are they typical of what retirees receive? What is the median California state employee's retirement benefit?

    • Right, because it's the responsibility of the bottom 99% to prop-up our welfare system now that the wealth of the nation has literally been hauled-off by a select few. No, really; what else do you think happens next?

  • Certain items aren't taxable in certain states. For example, clothes aren't taxable in New Jersey, where Amazon will start collecting tax in 2013.

    If Amazon is collecting tax inappropriately, then it should have passed the money on to the state. It would be up to the customer to request a refund on his/her state return. The inappropriate tax could offset tax that wasn't collected, but should have been.

    • Re: (Score:3)

      by alen ( 225700 )

      there are national services that compile this kind of data and sell it to corporations

      not a big deal

    • Re: (Score:2)

      by arth1 ( 260657 )

      The inappropriate tax could offset tax that wasn't collected, but should have been.

      When did Congress pass bills allowing the IRS to rob Peter to pay Paul's bill?

      • When did Congress pass bills allowing the IRS to rob Peter to pay Paul's bill?

        If I remember right it was around 1935.

  • The answer is generally yes, you pay sales tax on shipping & handling. Check your local state's department of revenue, though in general if a state can charge a tax it will.

  • I can tell you that's exactly how it's supposed to happen, in every state I've done the paperwork in.

    If you doubt, pick up the phone, order pizza delivery, and check out the receipt.

  • North Carolina does. So why not. Vote Higher Taxes 2012.

  • Here in Georgia, shipping on an item sold to another is taxable. I found that out when I ordered some toner for a copier from my local supplier but didn't have time to go pick it up. I called them and they pointed me toward the Georgia law laying it out.
  • Amazon is following the rules set by the California State Board of Equalization. Click here [ca.gov] and then click the "Applying Sales Tax" tab to see those rules. This is where it gets interesting. The BOE says they must charge sales tax on the shipping unless all of the following are true:

    You ship directly to the purchaser by common carrier, contract carrier, or US Mail

    Your invoice clearly lists delivery, shipping, freight, or postage as a separate charge

    The charge is not greater than your actual cost for delivery to customer

    The first item is basically a distinction between bringing the product to the customer yourself and using a service (like USPS, UPS, FedEx, etc.). Amazon isn't delivering the item itself, so this doesn't apply to them.

    The sec

  • Bad Summary (Score:5, Informative)

    by doug141 ( 863552 ) on Sunday November 04, 2012 @08:16PM (#41876275)
    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."

  • Shipping and Handling charges suck (Score:3)

    by Cruciform ( 42896 ) on Sunday November 04, 2012 @08:43PM (#41876431) Homepage

    A few years ago I was trying to find a gameboy advance cartridge that was fairly uncommon.
    Sam Goody's carried it for 16 dollars, so I ordered it immediately. They charged me 17 dollars and change for "shipping and handling".
    When the package arrived it was the size of a deck of cards and had $1.60 in postage on it, sent via regular post - not even first class.
    Talk about thieves.

  • You may have forgotten the days when Amazon made no profit on the books that it sold and made all its profit on shipping and handling charges. The profit for one quarter from shipping and handling was around $35 million as recall. Don't ask me for a citation; other than Wikipedia, I wouldn't know where to look.

  • It's the law in CA (Score:4, Informative)

    by kenh ( 9056 ) on Sunday November 04, 2012 @09:07PM (#41876575) Homepage Journal

    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]

  • Cross border shopping is worse... if i bring my purchases home into Canada, and the border guy is bored enough, I pay 13% taxes on the cost of the item, the state taxes, and shipping and handling costs.

    Usually they don't bother now until it's around $200. If I stay in the US, after 24 hours i have a $200 exemption (but $201 makes the whole thing fair game). After 48 hours I have an exemption on the first $800.

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