# check your receipts for Kindle Books - I was charged tax today



## Andra (Nov 19, 2008)

I just purchased 3 Elizabeth Peters books published by Hatchett Books and when I got my confirmation emails I was charged sales tax for the first time.  I'm not sure if this is part of the new pricing thing, but I called and canceled the orders since I already had the paper books.
Has anyone else been paying sales tax all along or did anyone else notice it on recent purchases??

Edit to Add
Here is the email I received once I got off the phone:
Hello,

Recently, several publishers modified their relationship with Amazon to an agency model whereby the publisher, not Amazon, sells the Kindle book. Kindle books sold by the publisher are subject to sales tax based on the publisher’s state tax reporting obligations and the taxability of digital books in those states.

As a result, sales tax for Kindle books sold by the publisher may differ from the sales tax to which you’ve been accustomed for Kindle books. Kindle books sold by Amazon Digital Services, Inc. are subject to sales tax in Kentucky and Washington State.

I hope this helps. Thanks for your interest in the Kindle Store.


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## Tripp (May 28, 2009)

Yea, I had heard about this somewhere over the weekend.  I have been paying tax since I live in WA and could understand why I have had to.  But this is just one more reason this publisher controlled model stinks.


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## Atunah (Nov 20, 2008)

I just bought a $1 book about 2 hours ago and I checked the order details and there was no charge for sales tax. 

I never have been charged sales tax so I hope it doesn't change.


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## luvmy4brats (Nov 9, 2008)

I bought 2 of the Elizabeth Peter's books today too. Just checked my receipt and I was not charged sales tax.


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## Geoffrey (Jun 20, 2009)

I bought a book from HarperCollins and got charged sales tax - it was .08 on a .99 sale so I guess I'll live ...  

Anyway, they must have offices in Texas.  I'll have to start a list to figure out who does and who doesn't ....


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## Addie (Jun 10, 2009)

Geoffrey said:


> I bought a book from HarperCollins and got charged sales tax - it was .08 on a .99 sale so I guess I'll live ...
> 
> Anyway, they must have offices in Texas. I'll have to start a list to figure out who does and who doesn't ....


So if a publisher has offices in Texas then they have to charge sales tax for any purchases made in that state but not outside that state? Okay, saying that out loud to myself makes me feel kind of dumb, but I do still want to double check!


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## KindleChickie (Oct 24, 2009)

Is there no end to the publishers hissy fits?  I seriously think I am going to stick to the independents for a while.  Let someone else finance their elitist BS.


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## Jane917 (Dec 29, 2009)

I have always been charged sales tax, but I guess it is because I live in WA.


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## Geoffrey (Jun 20, 2009)

yeah.  Online retailers have to charge sales tax if they have an offices, stores, warehouses in the customer's state .... now that the publishers are the retailers, it's based on where their buildings are and no longer on Amazon's ....


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## Addie (Jun 10, 2009)

Geoffrey said:


> yeah. Online retailers have to charge sales tax if they have an offices, stores, warehouses in the customer's state .... now that the publishers are the retailers, it's based on where their buildings are and no longer on Amazon's ....


Ah. I didn't know that. I mean, it makes sense and it should be something I know, but it's never something I've thought about. 
I'm just trying to justify my question now.  Thanks for the explanation!


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## Lyndl (Apr 2, 2010)

I don't paySales Tax (I'm in Australia) but I have to pay $2:00 for all the "free" books from Amazon.  They call it 'import tax'...


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## AppleHeart (Apr 10, 2009)

Thanks, luvmy4brats, for pointing out this thread, didn't realize there was one. 

I'm not really complaining....just that this is the first time I've ever been taxed and I was wondering if it had anything to do with this model or whatever it's called.

I'm not going to cancel the orders because I intend to eventually convert all my DTBs to Kindle if and when they become available, that is. This means that for anything not Indie, I'll be asking the library to order the books, heck, the library called me on 3/23 to pick up Harlan Coben's CAUGHT and since I ordered Stieg Larrsen's THE GIRL WHO KICKED THE HORNET"S NEST, I'll probably be the first one to read that as well.

As for taxes? I guess they (State/Federal) have to get it from somewhere and we're IT. Grrrr.... 

If I can go to the movies and buy old and new favorite TV serials on DVD, I shouldn't be complaining (heh!) about the sales tax on e-books, no? 

It's just that I think Amazon.com should make everyone aware that sales tax are now being added, maybe after the digital price, Kindle price, etc... I live in NJ and was never charged a sales tax before so perhaps NJ now collects taxes (7 cents for .99 and 14 cents for 1.99) for e-books? Gotta check on this.

Pax,

ebc  

Edited to change date to 3/23, not 4/23. Gaaggh!


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## luvmy4brats (Nov 9, 2008)

You'll only be charged sales tax if the publisher you're buying the book from has an office in your state. It's going to get confusing trying to keep track of which publishers have offices in which states and whether or not there will be sales tax.


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## pidgeon92 (Oct 27, 2008)

It depends on which states tax digital downloads. This is an _old_ chart that displays which states charged for digital downloads back in _2006_.


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## Forster (Mar 9, 2009)

hehehe, no sales tax in my state, ever.


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## Andra (Nov 19, 2008)

In my follow-up, I mentioned that it would be nice if there was a list of who was charging tax where so we could make better purchasing decisions.  It's not that I totally object to the tax - I just want to know ahead of time as that affects my book-buying budget...


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## corkyb (Apr 25, 2009)

I pay tax on everything from Amazon EXCEPT kindle books.  I HATE it. 
Paula ny


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## Pushka (Oct 30, 2009)

Lyndl said:


> I don't paySales Tax (I'm in Australia) but I have to pay $2:00 for all the "free" books from Amazon. They call it 'import tax'...


No. It is actually the whispernet fee. A body outside Australia cannot collect tax for the Australian Government and there is no import tax on goods costing less than $1000AUD


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## Jane917 (Dec 29, 2009)

Another reason I should have stayed in Montana!


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## telracs (Jul 12, 2009)

corkyb said:


> I pay tax on everything from Amazon EXCEPT kindle books. I HATE it.
> Paula ny


I'm wondering if we're gonna get hit now, Paula.


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## Forster (Mar 9, 2009)

Jane917 said:


> Another reason I should have stayed in Montana!


Yeah I never left.


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## Magenta (Jun 6, 2009)

Here are all the details about Sales Tax provided by Amazon:

http://www.amazon.com/gp/help/customer/display.html?nodeId=468512


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## Lyndl (Apr 2, 2010)

Pushka said:


> No. It is actually the whispernet fee. A body outside Australia cannot collect tax for the Australian Government and there is no import tax on goods costing less than $1000AUD


 What I meant to say is that *I* call it an import tax. But, the $2 is charged regardless of whether I transfer via the computer, or download wirelessly. So, I'm being charged for something that others can have for free. I think this is probably a topic for another thread.


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## 3pointers (Jan 8, 2010)

I wonder if we will get hit with 2 sales tax if we live in WA or KY, one from Amazon and one from the book publisher?


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## Pushka (Oct 30, 2009)

Lyndl said:


> What I meant to say is that *I* call it an import tax.


Nevetheless, it isnt a tax, whatever you might like to call it. Companies have no choice in whether they charge taxes or not. But in this case, Amazon can stop charging this fee whenever it wants to (just as it has stopped charging US people a $2 fee whilst they are overseas downloading).


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## VictoriaP (Mar 1, 2009)

3pointers said:


> I wonder if we will get hit with 2 sales tax if we live in WA or KY, one from Amazon and one from the book publisher?


Not in WA. Our sales taxes on ebooks haven't changed with agency pricing.

Realistically, sales tax is only collected once, and it's only for the state you live in. Amazon is turning over sales tax to Washington in this case. I imagine all taxes are paid by Amazon, not the publisher. Interesting accounting question though....hmm.....


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## kwajkat (Nov 6, 2008)

Any business that is based in Washington State is required by state law to charge WA customers sales tax. Guess now the rest of you are getting charged as well. Welcome to our world


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## pawsplus (Mar 31, 2009)

In the relatively near future, we will ALL be paying sales tax in the state in which we live for stuff we buy online.  They don't have it all worked out yet, but it's coming.  Just don't be surprised.


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## loca (Jan 3, 2010)

kwajkat said:


> Any business that is based in Washington State is required by state law to charge WA customers sales tax. Guess now the rest of you are getting charged as well. Welcome to our world


I guess sucks for you guys living there.


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## Andra (Nov 19, 2008)

I just don't like surprises.  The way that we purchase Kindle books doesn't give us a mechanism for seeing the actual total BEFORE the charges go through.  Either I want a list of who charges sales tax for my state or I want a 2-click purchase that will show me the total (including any taxes or whatever) before I actually hit "Buy."


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## marianneg (Nov 4, 2008)

KindleChickie said:


> Is there no end to the publishers hissy fits? I seriously think I am going to stick to the independents for a while. Let someone else finance their elitist BS.


Collecting sales tax is neither a "hissy fit" nor "elitist BS." It's the law.


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## bigdtc (Apr 1, 2010)

Andra, I like your point.  I should know what I am paying BEFORE the sale goes through.  Sounds like Amazon needs to change their one-click model for Kindle books.  Think I will mosey over and suggest that.


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## jaspertyler (Feb 13, 2009)

I was charged sales tax last week on Kindle books.  I did not know until I saw this thread and went back to look.  I am in Wisconsin.


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## Andra (Nov 19, 2008)

bigdtc said:


> Andra, I like your point. I should know what I am paying BEFORE the sale goes through. Sounds like Amazon needs to change their one-click model for Kindle books. Think I will mosey over and suggest that.


Thanks. I was trying to decide why I was so upset about the tax when I have to pax tax on other stuff. And it was the surprise at the amounts that were taken out of my bank account that got to me.
(Actually, that's a perfectly normal type-A control freak reaction, so I shouldn't be surprised!)


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## 911jason (Aug 17, 2009)

Andra said:


> Either I want a list of who charges sales tax for my state or I want a 2-click purchase that will show me the total (including any taxes or whatever) before I actually hit "Buy."


Magenta posted a link above that includes a list of states that pay taxes for the various publishers..

Quoted from that page:

The following is a partial list of merchants selling items at Amazon.com which may be included in your order, and the states in which they charge sales tax.

* Amazon.com LLC: KS, KY, ND, NY and WA
* Amazon Digital Services, Inc.: KY, ND, NY and WA
* Magazine Express, Inc.: AL and WA
* Synapse Services, Inc.: WA only
* Target.com/ITC: All states other than AK and VT
* * Hachette Digital, Inc.: AL, AZ, CO, CT, DC, HI, ID, IN, KY, LA, ME, MS, NC, NE, NJ, NM, SD, TN, TX, UT, VT, WA, WI and WY*
* Harper Collins Publishers, LLC: All states other than AK, AL, AZ, DE, HI, MT, NH, NV, OK, OR, SD, VT and WY*
* Simon & Schuster Digital Sales, Inc.: All states other than AK, DE, MT, NH, and OR*
* Macmillan: AZ, CO, CT, DC, HI, IN, KY, ME, MS, NC, NE, NJ, NM, SD, TN, TX, UT, VT, WA, WI and WY**


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## Andra (Nov 19, 2008)

Thanks, I looked at the link earlier and got lost.  I see that I should expect tax on my Mary Higgins Clark and Carol Higgins Clark books that are due out next week since they are Simon & Schuster.


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## gir (Feb 10, 2009)

Technically, the consumer is responsible for paying consumption taxes on all purchase made online from companies that don't charge it. I'm in CA, they don't enforce it, but that's really what you're supposed to do. You should be filing claims and such things but what a pain. There's no getting around it - taxes are taxes, whether the retailer is collecting it on our behalf or if we have to pay it directly to the state we live in.

I used to work for a dental supplier that only charged sales tax in the states where we had a physical presence (CA and KY), and I would frequently get calls from dentists in other states berating me for not collecting taxes for their own state. Usually, they were getting audited and were slammed with a huge unpaid tax bill. Oh well. Buyer beware.


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## vickir (Jan 14, 2009)

Wow. I didn't know about this!! Thanks for telling us. I'll watch for it now.


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## Sunnie (Apr 3, 2010)

Gir, I'm in accounting (kinda/sorta-long story), and we have to accrue for taxes that our vendors don't collect.  And yes, tax auditors from all appropriate states visit us all the time and nail us if we don't.    However, different states have different rules re what is taxable, especially when it comes to services and small equipment.  But I personally digress.  LOL


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## pugmom (Feb 23, 2010)

No Sales Taxes here in New Hampshire! But it is called Nexus...if a company has a presence in a state (be it an office or simply attending a trade show where they solicite business) they are required to collect sales tax....  and yes, people that live in Massachusetts (that does have a sales tax) that come over the border to New Hampshire and make a purchase of something that would be taxed in Massachusetts are required to file a sales and use tax return...but no one does...


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## happyblob (Feb 21, 2009)

loca said:


> I guess sucks for you guys living there.


It's coming to all of us. It's hard to imagine that the internet remains a tax-free zone.


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## Forster (Mar 9, 2009)

happyblob said:


> It's coming to all of us. It's hard to imagine that the internet remains a tax-free zone.


No, not _all_ of us.


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## Toby (Nov 25, 2008)

Not really. I occasionally buy products from Levenger online & have to pay for tax, because they have a physical store in Boston, Ma. As for shipping, the items are not necessary shipped from Ma, so it's expensive, or it's just that I am just spoiled from buying products at the shopping networks. The total could amount to paying an extra $20.00 or more, which I am not used to. Bummer!!


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## Ann in Arlington (Oct 27, 2008)

I admit I don't worry too much about paying tax. . . . .I know I'd pay tax if I bought something in a store here and it doesn't bother me at all when a catalog or on line vendor charges it.

However,  I will shop around for the best shipping deal . . . . . . .


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## Ilovetoread (Apr 4, 2010)

Ann in Arlington said:


> I admit I don't worry too much about paying tax. . . . .I know I'd pay tax if I bought something in a store here and it doesn't bother me at all when a catalog or on line vendor charges it.
> 
> However, I will shop around for the best shipping deal . . . . . . .


That is how I feel as well. Sales tax doesn't bother me but sometimes shipping can be absurd. I went to buy a bracelet on Amazon, a banned book one, and the shipping was 30% of the actual cost of the bracelet! I bought it anyway, because it is so unusual, but I was surprised.


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## Ann in Arlington (Oct 27, 2008)

Ilovetoread said:


> That is how I feel as well. Sales tax doesn't bother me but sometimes shipping can be absurd. I went to buy a bracelet on Amazon, a banned book one, and the shipping was 30% of the actual cost of the bracelet! I bought it anyway, because it is so unusual, but I was surprised.


That's where Amazon Prime can really come in handy. . . . .and, as a result of having it, I _always_ check to see if Amazon has what I want to buy and if Prime is available for it. . . . . . .but, for instance, I just bought a small laptop via CompUSA rather than Amazon. The price was the same on both sites, but it was not eligible for Prime on Amazon (it was actually from CompUSA but via Amazon) -- shipping would have been on the order of $10. Shipping at CompUSA would have been $15, BUT they were running a 'free shipping' promotion. I like FREE.


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## Ilovetoread (Apr 4, 2010)

Ann in Arlington said:


> That's where Amazon Prime can really come in handy. . . .


I have Amazon Prime, but this was sold by a company through Amazon and isn't available any other way (I've been able to find, by google) except the artist's web site. And it had the same shipping cost. I decided it was safer to buy via Amazon, as they do help if there are problems. It is covered by Amazon's A-Z guarantee through Amazon. 
This is the bracelet on Amazon:
http://www.amazon.com/Banned-Books-Bracelet_-adult-titles/dp/B000I3P9JQ/ref=sr_1_1?ie=UTF8&s=jewelry&qid=1270906343&sr=8-1


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## Ann in Arlington (Oct 27, 2008)

I think I've seen that in Wireless and/or Signals catalogs. . . . . they're both pretty reputable too, but I agree going through Amazon adds another level of safety. . . .


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## Andra (Nov 19, 2008)

Well, the mystery deepens.  I got my pre-orders from Simon and Schuster on Tuesday and NO TAX.  Maybe I ordered them before the publisher stepped in?


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## angelad (Jun 19, 2009)

Andra said:


> Well, the mystery deepens. I got my pre-orders from Simon and Schuster on Tuesday and NO TAX. Maybe I ordered them before the publisher stepped in?


May be, but not every state charges tax.


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## observer1 (Mar 17, 2010)

from the amazon kindle blog:

Initial post: Apr. 6, 2010 5:29 PM PDT 
Amazon Kindle Customer Service says:
  
Several publishers have recently changed the nature of their relationship with Amazon, moving to a business model whereby the publisher, not Amazon, is the seller of record for their books. Kindle books sold under this model are subject to sales tax based on the publisher's state tax reporting obligations and the taxability of digital books in those states. Books where the publisher is the seller of record say "This price was set by the publisher." Nothing has changed with respect to sales taxes on Kindle books where Amazon is the seller of record.


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## davem2bits (Feb 2, 2009)

Drizzle Drazzle Drizzle Droll!!!

Time to relocate my Kindle's Amazon account to a state that does not have sales tax.


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## Pushka (Oct 30, 2009)

it is the state in which the Publisher's books  are sold from isnt it?  Not where your kindle lives.


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## 911jason (Aug 17, 2009)

No, tax would be charged based on the laws in the state where the purchaser lives if the selling party also has a legal presence in that state.


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## kb7uen Gene (Mar 13, 2009)

Correct me if I am wrong, but hasn't Amazon always charged sales tax on books we buy? It seems to me I've always paid tax, but maybe that is because I live in Washington State where Amazon is based.

Gene

The short article below is from Geek.com.

Amazon to begin charging sales tax on Kindle books 
Apr. 16, 2010 (3:45 pm) By: John Brownlee

When Apple announced the iPad and its iBooks e-reading platform, Amazon almost overnight lost the war in establishing a set price for e-books on the Kindle marketplace. Overnight, the price of many books rose several dollars from the traditional $9.99.

But it's not going to end there: Kindle books are about to get a bit more expensive. They have to now charge sales tax.

The issue is that now that publishers are setting the price for their e-books, Amazon has to collect sales tax based on the state in which the publisher resides.

Says Amazon: "Several publishers have recently changed the nature of their relationship with Amazon, moving to a business model whereby the publisher, not Amazon, is the seller of record for their books. Kindle books sold under this model are subject to sales tax based on the publisher's state tax reporting obligations and the taxability of digital books

in those states. Books where the publisher is the seller of record say "This price was set by the publisher." Nothing has changed with respect to sales taxes on Kindle books where Amazon is the seller of record."

It's not a big deal - five percent here or there - but it adds up, and as far as I know, Apple is not following suit with the iPad. Amazon is really losing its competitive edge in the e-book marketplace here. Let's hope they can recover.

Read more: http://www.geek.com/articles/news/amazon-to-begin-charging-sales-tax-on-kindle-books-20100416/#ixzz0lgZifOgi


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## larryb52 (Nov 18, 2009)

I think they have taken the wrong stand, tax is just one part of it the other is with penguin books, they price the hardbacks at 9.99 & of course the kindle version is no where to be found ipad & kobo along with B&N are releasing these. I wrote them directly reference to CJ Box books got almost an immediate response as yes all e-books were available to those that wanted them...closely worded, so in essense Box's book is there, I found the webpage Amazon has setup I guess so they can release BUT they can't seem to get the deal done and no one is talking on what the hanup is, it's just not fair...


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## Scheherazade (Apr 11, 2009)

It really feels like Apple came and bullied its way into an arena it's not even taking seriously and screwed Amazon over.  I stopped buying Apple products when I went with a Zune for my new mp3 player, but that was just a choice due to the problems I had with my iPod.  Now I'll be avoiding their products outright because of their shady business model of which this is only a very tiny slice.


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## VictoriaP (Mar 1, 2009)

Has anyone with an iPad actually confirmed the no sales tax rumor from this article?  I should think that's a tough one, considering Apple stores are pretty near ubiquitous.  Hard for them to say they don't have a physical presence in quite a few states.

I'm in WA, so like Gene, I've always paid sales tax on this stuff.  And I have to say that while it's annoying, it's minor in comparison to the actual price increases the publishers have set.


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## Basilius (Feb 20, 2010)

kb7uen Gene said:


> It's not a big deal - five percent here or there - but it adds up, and as far as I know, Apple is not following suit with the iPad. Amazon is really losing its competitive edge in the e-book marketplace here. Let's hope they can recover.
> 
> Read more: http://www.geek.com/articles/news/amazon-to-begin-charging-sales-tax-on-kindle-books-20100416/#ixzz0lgZifOgi


If Apple is not following suit, then their either rolling the sales tax into the cost of the book (which breaks the Agency Model agreement with the publishers, as that's a discount), or they're breaking the law. They're required to collect sales tax from everyone in a state where the publishers have a physical presence. The publisher is the seller of record, not Apple. Amazon posted a list a couple weeks ago of exactly who collects tax where.


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## pidgeon92 (Oct 27, 2008)

I am going to merge this topic with a prior topic on the same subject (once I locate it ).

E-books are digital downloads. Despite Amazon, B&N, publishers, etc., having nexus in the state, not all states tax _digital_ downloads. e.g., Apple has several stores in Illinois, but Illinois does _not_ collect tax on digital downloads.

Here is a map from 2006 that I posted previously. It indicates which states (at that time, some may have changed) tax digital downloads:


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## kb7uen Gene (Mar 13, 2009)

Apple also has a store in the Seattle area.  Our governor is serious about getting sales tax on online purchases, so if it isn't happening on the iBook purchases than Apple must be doing something shady.

Gene


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## loca (Jan 3, 2010)

kb7uen Gene said:


> Apple also has a store in the Seattle area. Our governor is serious about getting sales tax on online purchases, so if it isn't happening on the iBook purchases than Apple must be doing something shady.
> 
> Gene


State legislature must be pushing it.


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## happyblob (Feb 21, 2009)

Amazon is benefiting from the fact that they do not collect tax. It allows them to keep costs down. A 'flat rate' tax for all internet purchases made in the states would also alleviate the complication of reporting tax based on county.


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## scottmarlowe (Apr 22, 2010)

I just bought a Kindle book and was charged sales tax. I went back and looked at my previous receipts and like I thought, no sales tax.

I'm also in Texas like some others, so I guess the publisher in this case also has offices here. I know when I buy Dell computers I always have to pay sales tax.

This unfortunately takes away one of the great things about online purchasing inasmuch as Amazon is concerned. I know this is a growing trend for states to start collecting sales tax from online purchases, but Texas has resisted this so far in cases where the transaction crosses state boundaries, anyway.


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## scottmarlowe (Apr 22, 2010)

kb7uen Gene said:


> Correct me if I am wrong, but hasn't Amazon always charged sales tax on books we buy? It seems to me I've always paid tax, but maybe that is because I live in Washington State where Amazon is based.


I've never paid sales tax when buying through Amazon. Maybe when it's through one of their 3rd party vendors, but not Amazon directly. Not until today, anyway.


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## Andra (Nov 19, 2008)

Scott, right now mine seem to be hit or miss.  The publishers listed earlier are charging sales tax on some of their e-books, not all of them.  It's very weird.  Hopefully they will decide that their "agency model" is not working and go back to letting Amazon actually set the price and sell the book.


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## scottmarlowe (Apr 22, 2010)

Andra said:


> Scott, right now mine seem to be hit or miss. The publishers listed earlier are charging sales tax on some of their e-books, not all of them. It's very weird. Hopefully they will decide that their "agency model" is not working and go back to letting Amazon actually set the price and sell the book.


Yeah, that just gets confusing. I was happy with the no sales tax policy. ;-)


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## Cindy416 (May 2, 2009)

I live in MO, and my daughters are in KS, and so far, none of us has been charged tax. I guess our books have been Amazon e-books, rather than from the publishers.


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## marianneg (Nov 4, 2008)

Cindy416 said:


> I live in MO, and my daughters are in KS, and so far, none of us has been charged tax. I guess our books have been Amazon e-books, rather than from the publishers.


Since it seems that none of the agency publishers have a presence in your state, you won't be charged sales tax on any ebooks.


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## 911jason (Aug 17, 2009)

http://news.cnet.com/8301-13578_3-20009938-38.html?part=rss&subj=news&tag=2547-1_3-0-20

*Congress weighs curbs on state 'iTaxes'*

















If there are two things state tax collectors seem to agree on, the first is that finding more money could really come in handy right now. The second is that taxing iTunes and other digital purchases might just do the trick.

A new proposal in the U.S. Congress is, however, designed to curb many of these "iTaxes," which have popped up all over the country in the last three years. Currently, some 23 states and the District of Columbia levy sales taxes in one form or another on e-books, music, apps, ringtones, and other digital downloads.

The bill, sponsored by Reps. Rick Boucher (D-Va.) and Lamar Smith (R-Tex.), is part of a broader effort by technology firms and telecommunications providers to push back against what they view as tax agencies that are unreasonably singling out electronic purchases with unfair, expensive, and confusing rules.

Apple, AT&T, Electronic Arts, Cox Communications, Verizon, T-Mobile, and Time Warner Cable are among the companies that have endorsed the legislation, saying that "fast-paced technological and commercial changes are making it increasingly difficult, and in some cases nearly impossible" to comply with "confusing and conflicting" state tax laws.

Even cloud-computing applications, which might seem straightforward enough, can create tax headaches for Internet companies. New York and Utah both tax cloud computing, but New York taxes it based on the address of the customer, while Utah calculates rates based on where the server is located.

"It is definitely a growing problem as states that are adopting legislation each take a different approach to the issue," says Stephen Kranz, a partner at the Sutherland Asbill and Brennan law firm who tracks state legislation. "As electronic delivery of content and services grows, so too will the problems associated with multiple and discriminatory state and local taxation."

Other states have singled out downloaded music for tax rates reserved for "telecommunications services" that are more costly than sales tax rates, Kranz says. Some rates can even go as high as 15 or 20 percent. (Industry figures from 2006 show (PDF) that the average telecommunications tax on wireless is 10.94 percent, far higher than the 6.94 percent average nationwide rate for sales taxes.)

Opposition to the legislation introduced last week, titled the Digital Goods and Services Tax Fairness Act, is likely to come from state and local officials concerned that Washington might slap unreasonable limits on their tax collection procedures.

Neal Osten, who oversees federal-state tax issues for the National Conference of State Legislatures, said on Wednesday that he has not yet reviewed the bill. The National Governors Association did not immediately respond to a request for comment. Scott Peterson, executive director of the multi-state Streamlined Sales Tax Governing Board, said his organization has not been asked to take a position on it.

Boucher, one of the measure's two sponsors, represents a rural Virginia district that's been targeted by Republicans for a takeover this fall by State Senate Majority Leader Morgan Griffith. Lending his support to a lower-tax measure is likely to help Boucher, who said the bill was necessary because "unfair, multiple, and inconsistent taxation of these digital goods and services will increase costs for U.S. businesses and make them less competitive in the global economy."

Perhaps the most controversial part of the Boucher-Smith bill is the section that says only those iTaxes on downloads that have been formally approved by state legislatures are valid. That would end what critics describe as the controversial practice of state tax collectors stretching century-old legal definitions to permit levying iTaxes without any actual authorization.

CNET first described the phenomenon in a 2006 article, which cited examples like Kentucky's law that did not explicitly permit iTaxes. Nevertheless, Jill Midkiff, a spokeswoman for the Kentucky Department of Revenue said at the time, "Music is included because music downloads fit the definition of personal property."

Since then, 10 states and the District of Columbia now say digital content is tangible personal property, even though their legislatures have never made that clear. Those states are Texas, Arizona, Colorado, Connecticut, New Mexico, Louisiana, Alabama, Idaho, Hawaii, and Maine, according to the Sutherland law firm's research. (Thirteen other states tax digital downloads based on specific laws instead of administrative interpretations.)

"Tax administrators say that a ringtone is the digital equivalent of tangible personal property," says Steve DelBianco, executive director of the NetChoice coalition, whose members include AOL, eBay, and Yahoo. "What do they think it is? A doorbell? You can't let a tax administrator who never has to stand for reelection deem things as 'taxable.'"

Another portion of the bill prohibits taxes on "digital medical services, digital education services, or digital energy management services."

A third section would prevent "multiple or discriminatory taxes" on "digital goods or digital services." That amounts to a preemptive strike against state and local governments that might decide that digital purchases should be taxed at, say, two or three times the normal sales tax rate.

Thanks to an all-but-forgotten law that expires on November 1, 2014, such electronic-only taxes currently are prohibited. But once the moratorium expires, states will be free to levy discriminatory taxes unless the Boucher-Smith bill is enacted.

"Legislation like this is necessary because tax administrators have been so aggressive in reaching for new taxes on digital goods and services," DelBianco says. "With the expiration of the moratorium in 2014, nothing will stand in their way." (The National Taxpayers Union also likes the bill, calling it an "excellent" first step.)

State tax collectors haven't exactly been idle. They've been trying to force Amazon to turn over purchase records in North Carolina; attempting to force retailers to become tax-tattlers in California and Tennessee; and putting the squeeze on affiliate programs in Colorado. The Direct Marketing Association sued Colorado last week, saying its law requiring out-of-state retailers to turn over purchase history information is unconstitutional.

Meanwhile, Rep. Bill Delahunt, a Massachusetts Democrat, introduced a bill last week that seeks to compel retailers like Amazon to collect sales taxes.

The Boucher-Smith bill "removes one avenue for states to tax Internet commerce at oppressive rates," says Kelly Cobb, government affairs manager for Americans for Tax Reform, which runs the Stop eTaxes Web site. "However, the battle over the next year will be fought with those who look past digital goods and just want to tax everything online, despite the constitutional violations."


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## Guest (Jul 8, 2010)

911jason said:


> http://news.cnet.com/8301-13578_3-20009938-38.html?part=rss&subj=news&tag=2547-1_3-0-20
> 
> *Congress weighs curbs on state 'iTaxes'*


I can only hope this is sorted out. States have gotten increasingly desperate with trying to collect sales taxes on internet sales, particularly downloads. I don't mind paying taxes per se (OK, I do sometimes) but it needs to be rational. Amazon has been at the forefront of pushing back. States have been trying to collect taxes at three different points:

1. The physical location of the online seller.
2. The physical location of the referring seller (affiliate programs).
3. The physical location of the buyer.

Without some sort of regulation on a federal level, you could end up with the following scenario.

I live in *************, which collects 7% sales tax. I buy through an affiliate link from someone in New York City, which collect 8.8% sales tax. But Amazon is in Seattle, which collects a 6.5% sales tax. Without some sort of legislation, you can eventually end up paying a sales tax to all three.

The cleanest way to resolve it is that sales tax should be based on the physical address of the buyer.


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