The other day I was at my girlfriend’s house who lives in a different county, and I made a digital purchase on one of my gaming consoles. It asked me to input the ZIP code of my current location, and then it applied the local sales tax rate to the purchase. The sales tax in her county is slightly less than the tax in my county.
So this got me thinking: Legally, what dictates the application of sales tax rates for digital purchases in terms of location? Does it matter where you are when you make the digital purchase? Or does it matter where you reside, which I guess would be dictated by your billing address? For physical purchases, obviously you pay the sales tax for the location of the store, which somewhat implies that a digital purchase might receive the sales tax rate of wherever you are when you make the purchase. I guess a different way of evaluating this would be, how does the sales tax for a digital purchase make it from the seller to the county or other form of local government that collects the sales tax?
I’m asking this mostly out of curiosity, but I guess on some level, I’m wondering if I should make all my digital purchases when I am in the county with the cheaper sales tax. Or, in an ultimate sense, if I visited a no sales tax state, could I legally make a bunch of digital purchases while there and pay no sales tax? I don’t think there’s any practical way to literally do this, because almost every digital platform references your billing address for sales tax, at least to my knowledge, which is why I was so surprised that my game console did this.
Sales Tax for Digital Purchases While Traveling
byu/chrskspr intax
Posted by chrskspr
2 Comments
Probably the sales tax rates applicable to the seller. Seller generally pay tax in as many states as they make sales over a certain limit.
Every place I know of, sellers are responsible for collecting and paying sales tax, and they simply pass it on to customers. Sellers report their sales, usually monthly, based on the transaction locations, then remit the required amounts to the state or local government agencies. Not your circus, not your monkeys.
If you think it’s worth your time and/or gas money, you can go to lower tax areas to make your purchases. Going to a zero-sales-tax state might make you technically liable for a “use tax” or “compensating tax” in your home state. IDK how often anyone gets busted for that.