General Question

guywithanaccountnow's avatar

Do you have to pay sales taxes on intangible things sold on the internet?

Asked by guywithanaccountnow (313 points ) January 18th, 2013

And if so, can you make it the buyer’s responsibility to pay the tax themselves, or is it always your responsibility?

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6 Answers

ragingloli's avatar

It is a service they pay for, so taxes apply in any case, and yes, it is always your responsibility.

zenvelo's avatar

It depends on what the tax status is in your jurisdiction. In California some services are taxable, others are not. Different things are taxable in different states, such as clothes or food.

It is the buyer’s responsibility to pay the tax, but it is usually the seller’s responsibility to collect it and deliver it.

SadieMartinPaul's avatar

Let’s take this step by step.

(1) You’re asking about intangible personal property, which means things of value that have no physical form and can’t be held or touched. Examples include a copyright, patent, trademark, or equity securities. Is this what you’re intending to ask about?

(2) At its fundamental definition, a sales tax is an excise fee charged on the transfer of title to tangible personal property. That is, when someone purchases goods, the state may require the seller to collect sales tax at the point of purchase. Many states expand the definition to include certain services and intangible assets.

(3) A seller is required to withhold and remit sales tax if it has nexus, in the form of a physical presence, within the buyer’s state. Example. L.L. Bean is located in Freeport, ME, so it collects Maine sales tax on any catalogue or internet transactions shipped to a Maine address. I live in Virginia, and L.L. Bean has a retail store in Tysons Corner, VA. So, when I ordered a dog bed for Sadie, L.L. Bean had to withhold Virginia sales tax on my purchase; the company has a brick-and-mortar presence within Virginia, so it has sales tax nexus.

(4) If an out-of-state seller isn’t required to collect sales tax—absence of nexus—many states require the purchaser to declare the transaction and pay the tax. This is called Use Tax, and it generally applies to both businesses and consumers.

I’m giving you some information that can’t be construed, in any way or manner, to be tax advice. Although I’m highly qualified to provide tax advice, an internet message board isn’t the place to do so. I just hope that this information will be helpful.

JLeslie's avatar

I am going to assume you are in the US. The basic rule is if the business does not have a brick and morter headquarters or store in your state, you don’t pay tax on products. For instance, if you live in TN and buy a blouse on Macy.com, and have it shipped to your home, you pay sales tax for where you live, just like you bought it in a store. Buy from bloomingdales.com, no tax, because there is no bloomingdale’s in the state of TN. But, you say intangible, so I am not 100% sure about that.

If it is taxable, the company must pay the tax, so they pass it on to the consumer. If the company does not charge you tax and the requirement in the state is to pay tax, and assuming the company adheres to the tax laws, then they would still pay their obligation, and not charging the customer tax would mean it eats into the company’s profit.

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