Gripe Line reader Ken wrote to complain about a mysterious tax that was added to a recent order he placed for a Seagate hard drive.
When he questioned customer support about the fee, "They said the $2.00 additional charge was for 'Sales and other taxes,'" he explains. This might seem reasonable to most, but Ken was sure he didn't owe this tax.
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"I live in New Hampshire and there is no sales tax here. I know it is only $2 but as a native of the last state without an income or sales tax, it is the principle that bothers me," he says.
When pressed, the customer service representative called the tax a "shipping tax" and, later, a "state tax." None of this did anything to mollify Ken's ire. "I have placed many online orders in many different states over the years and I never had to pay any sort of tax before," he says.
I forwarded Ken's gripe to Seagate, but the company declined comment. Ken, however, kept after the company. His representative eventually told Ken, "I was misinformed regarding the tax. The extra amount was an authorization or pending charge, to make sure enough money is available to cover the total." He assured Ken that he would not actually be charged the $2 fee. Ken isn't really buying that story and suspects he was simply charged the tax by accident, and it was removed when he pointed out the mistake.
I suspect that Ken's irritation over this $2 tax is matched by the states' fury over sales tax (not just New Hampshire but a handful of others that stay out of the fray by not charging sales tax) and merchants who sell via the Internet. The situation is a confusing mess that costs the states millions in potential revenue and creates a bookkeeping nightmare for merchants. Consumers who live in states that do charge sales tax have been benefitting from the confusion by not paying sales tax for many items purchased online.
If an online retailer has a physical presence in a particular state, such as a store, business office, or warehouse, it must collect sales tax from customers in that state. If a business does not have a physical presence in a state, it is not required to collect sales tax for sales into that state. This rule is derived from a 1992 Supreme Court decision which held that mail-order merchants did not need to collect sales taxes for sales into states where they did not have a physical presence.