I have a eCommerce site for a client, with a somewhat unusual taxes situation. They sell tickets to their theater show. The theater is in Wisconsin, so the location never changes. They have just decided they need to start charging Sales Tax for these tickets.
Sales Tax is charged on a per-state basis in the United States. If you order something online from a Wisconsin company to be billed and delivered in Wisconsin, you pay sales tax on it to that company for sure. If you order something online from a Wisconsin company to be billed and shipped to California, you DO NOT pay sales tax online. Supposedly you are supposed to pay sales tax on the purchase to your home state, but of course nobody does.
In the case of my client, people can order the tickets from anywhere, so their BILLING address may be California, but the tickets are held Will-Call. So essentially the product is delivered and consumed in Wisconsin.
So should these out-of-state buyers be charged Wisconsin sales tax or not?
I ask because it’s not an easy thing to do with the eCommerce software I am using. Taxes are applied REGIONALLY by State, not globally.
I would say yes, they should be charged sales tax.
I’m from NY state, so if I walk into a store in Wisconsin and buy a product, I will pay sales tax even though my billing address is NY, and I’m from NY, and I might even take that product back to NY with me. Same with the tickets, right? The product is being picked up, and consumed in Wisconsin regardless of where the patron is from, or where their billing address is.
The answer is yes. If you think about it they do have to pay tax. Technically if you go on holiday and buy a product in another state you pay the tax there, even though the your credit card belongs to someone who lives in another state (you!).
It is simple if you think about it, if you buy petrol in another state you pay tax on it in that state don’t you? Therefore the same applies to this situation.
It is a federal crime to charge a tax to anybody that shouldn’t be taxed in the first place due to their situation. You should treat the buyer by their physical residence. If I live in Oklahoma (which I do) and I buy a product from a website headquartered in Oklahoma, I have to pay an Oklahoma sales tax. Anybody not in Oklahoma is obligated to pay an Out-Of-State "Use Tax" which is usually their states local sales tax. Even if I buy a product that can only be used in that one state.This falls upon them (the consumer) and failure for the consumer paying their "Use Tax" can result in an audit, but this is not the responsibility of the vendor to make sure that the tax is paid.
Also, if the company has a distribution center in a different state, it is your job to charge the appropriate tax for both states, but you probably already knew that ;)