Many states insist that you charge sales tax on Shipping and Handling. Currently E-junkie doesn't appear to have this capability. At this time, 25 states insist you charge tax on shipping and handling charges. If you live in one of these states and are using E-Junkie as your cart, chances are you are breaking the law.
Many (probably most) Internet shopping carts do not or cannot charge sales tax on shipping or handling. Even PayPal's own shopping cart does not do this. We are working on an enhancement to our service that will optionally allow you to include S&H charges for the calculated tax amount, but that feature is not ready yet.
Every Merchant is reponsible for knowing and complying with their own states' tax regulations and keeping up-to-date with any changes in those. Our sales tax calculation is just a convenience service; it is not intended nor offered as a means to ensure full legal compliance, and just because we do not automatically calculate sales tax on S&H doesn't mean the Merchant can't calculate that amount on their own. Note that our sales tax calculation does not actually pay any tax amounts directly to any state revenue dep't -- each Merchant must still independently tally up their total sales, calculate how much they owe in sales taxes, and pay those taxes in lump sum amounts, so they are welcome to include S&H charges in the total sales tallies they are using to calculate their total owed taxes.
BTW, you may wish to verify your sources and check how recently their info was updated, because these things are changing all the time. For instance, we recently communicated with someone in TX (a state on your list) who had read somewhere that S&H was taxable in TX, but they later confirmed with an agent in their state revenue dep't that they were not liable for tax on S&H for online sales.
Some states only allow taxing on shipping but not handling, or vice-versa. Some may only require taxing those services for in-person sales at a physical store (like if you're buying a gift in-store for the store to ship elsewhere), or only for sales which are "shipped" by a local delivery courier (buying furniture to be delivered to your home), or only where the S&H is included in the purchase price and not itemized as a separate charge on the invoice.
Sometimes it's misleading at first, as where some states (CA for example) say S&H is taxable if the actual merchandise is taxable, but then later in the regs they exempt any such taxation when the shipping charges only cover actual shipping costs when itemized separately on the invoice/receipt and the item is shipped by a parcel service (USPS, UPS, FedEx, etc.).
# POSTED ON: May 9, 2008 @ 12:40 GMT -7 MODIFIED ON: May 9, 2008 @ 12:44 GMT -7
Actually, I spoke with a state tax representative in Texas earlier this week that confirmed S&H is taxable for online sales. So, at least in that particular case, my sources were verified... I would love to know who the person you referenced spoke with as it would save me a lot of money! I live in Texas!
I don't mean to sound alarmist and I appreciate the great job you guys are doing, but I think this is something that a lot of people assume is being calculated correctly.
While you point out that people can go back and calculate tax by hand (and pay it out of their own pocket instead of the customer's...) You can imagine that isn't optimal... The purpose of a shopping cart isn't to get the tax "close enough". Believe me, the government tends to frown upon "close enough". :-)
Anyway, keep up the great work and I hope this is at the top of the list for things that need to get fixed.
Penny, we are very soon going to add this feature. Please note though that this is a "feature" which will let you customize the tax settings to extend to shipping as well. This is not a "fix" per se :)
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