Are ecommerce sales taxes dependent on the server's location?

[microtekblue]

Only because Amazon uses affiliate partners who have a presence in NY, thus establishing a nexus with the State of NY.

In the absence of a physical nexus with the Buyer's State, the Seller cannot be compelled to collect Sales Tax for said State.

Well not sure if it matters if the affiliates are located there or not, but being from Canada, I was advised by Revenue Canada that IF we sell to Other provinces we Must contact them and charge that provinces sales tax and pay that tax to them.

So if we sell to Provinces like Alberta, and we are located in Ontario, we will Not charge them PST. Only GST becuz that is the only tax in that province. In Ontario, we must charge the full GST & PST.

[deepsand]

Well not sure if it matters if the affiliates are located there or not, but being from Canada, I was advised by Revenue Canada that IF we sell to Other provinces we Must contact them and charge that provinces sales tax and pay that tax to them.

So if we sell to Provinces like Alberta, and we are located in Ontario, we will Not charge them PST. Only GST becuz that is the only tax in that province. In Ontario, we must charge the full GST & PST.

Of course Canadian Law is quite different from that of the U.S., with the most important difference owing to the fact that the individual States here are Sovereigns, rather than Provinces, each with their own Laws, but with Interstate Commerce being regulated by the U.S. Congress as per our U.S. Constitution. And, given that our Congress has not specifically undertaken the issue of taxation of interstate sales, there results a natural tension between the Commerce and Due Process Clauses of our Constitution.

[ornamentlady]

Microtekblue,

I don't know what province you are in but we are located solely in B.C. We only have to collect provincial sales tax for sales shipped within B.C. We were audited by the government this summer and no problems were found with our sales tax collection or remittance. We do, of course, have to collect GST/HST on all sales shipped within Canada.

[Orion]

And when Canadian's Sell to Americans we have to charge GST there too... thankfully that's Zero Rated so it's no taxes as apposed to non-taxable.

I'm lucky with my business in that I only sell services and not a tangible product so we don't have to worry about provincial or state taxes that way.

btw, our servers are located in Arizona... it doesn't matter tax-wise at all...

Basically.. US or Canada.. taxes are based on where the Buyer is located however the Seller can only collect the taxes they are set up to collect for their state or province.

So...

A Canadian selling to another Canadian - Federal taxes apply
If both in same province - provincial taxes apply
A Canadian selling to American - Federal taxes apply (0% though)
US to US - state taxes apply (I don't think you have federal taxes there beyond income tax??)
different states - seller wouldn't collect if they don't have an office or agent there

Here's the kicker... and I only know one side of this one.. American selling to Canadian
Canadian is required to pay provincial and federal taxes and possible duty on the product at the border (dependant upon what the product is of course and it's value).. however Canadian can then apply to get most or all of those taxes reimbursed. Ya.. gotta love bureaucracy! lol

[southplatte]

Chiming in late on this one, but based upon my business ownership experience, as well as working for a wholesaler/retailer and now performing web/catalog orders for a large company:

If you have a physical presence in that state, whether it be warehouse, call center, headquarters or what, you have to collect all applicable state AND local taxes. hence, if your warehouse is in Denver, Co any orders to the state of CO collect State tax, any orders within Denver county collect State and County tax and any orders in the city limits of Denver collect City, State and County tax.

The true question begs to be answered, is the web hosting provider, being likely a third party to the business, considered a physical location? If so, then sales tax probably is required to be collected within the boundaries of the City, County and State realm, depending upon the location the order is coming from.

As already pointed out, a good CPA would be able to identify the true needs of this type of question, exception being the definition of a physical presence, and if a web site on a server counts as a physical presence.

[deepsand]

The true question begs to be answered, is the web hosting provider, being likely a third party to the business, considered a physical location?

While the States might like to claim that such does in fact constitute a "substantial nexus," by way of holding the hosting company to be an "Agent" of the Seller, given that the Seller has no authority re. what, when & how the host performs, that argument would most surely seem to be doomed should it ever reach a Federal Court.

[Orion]

While the States might like to claim that such does in fact constitute a "substantial nexus," by way of holding the hosting company to be an "Agent" of the Seller, given that the Seller has no authority re. what, when & how the host performs, that argument would most surely seem to be doomed should it ever reach a Federal Court.

There have been circumstances where the courts have deemed the server location as a 'location' for a company, however the business would have to be run from there and you'd have to be fairly locked into that location. Oh.. and I recall it was for a suit not for taxes...

The majority of e-commerce businesses can be located in any of a thousands data centres in any of a few hundred countries around the world at any time totally oblivious to the public. The fact that in a few hours you can move your entire site from state to state or country to country in most cases makes it very hard to qualify your 3rd party host provider or data centre as being your agent...

Last piece... a HUGE number of site owners don't really know where the heck there site is located! lol... I'm in Canada and sell hosting here... We have most of our servers in Arizona, but we also have sites in Canada, NY, California, Texas, Japan etc. A client wouldn't know unless they asked!

[billc]

I have a friend who has an Internet business located in California. But for any sales to California, he ships it to Nevada and from there to California. But to the best of my knowledge he has never been audited

[amxfan]

Quote "“Again, here in the states, it does not matter where you register your business, it has more to do with where you are physically located. I am personally, physically located in TN. My website is hosted out of a different state, so in theory the sales actually take place in the state where the server resides. Don't believe it. Your business has to be registered where you are physically located and you must collect sales tax for that state that you are physically located in. Again, this is here for the US....”

I quoted this in a different thread as someone was wondering if they should register their business in Canada or the USA. I'm sorry if you misunderstood it. So I will clarify what is DOES state.


1. Again, here in the states, it does not matter where you register your business

Talking about Canada or USA

2. it has more to do with where you are physically located.

Not where you server is but where your business is located.

3. I am personally, physically located in TN. My website is hosted out of a different state, so in theory the sales actually take place in the state where the server resides. Don't believe it.

It is a misconception that you collect in states where your server is as this is where the sale took place. That is why I brought it up here AND also why I followed with Do not believe it meaning it is not true.

4. Your business has to be registered where you are physically located and you must collect sales tax for that state that you are physically located in

If you're located in TX and conduct business out of TX, then you MUST collect sales in TX. If you have stores in FL,TX,and PA and you conduct business from FL,TX and PA, then you collect sales tax in FL,TX and PA.

5. Again, this is here for the US....

I do not know how it works in Canada as that is where the person in the thread was that this was taken from lived.

Again sorry for the confusion but I thought I had it spelled out. I will try harder next time.

[ronchalice]

Sales taxes throughout the US are complex and incredibly unique. Some states charge tax on everything coming in as either sales or "use" tax, no matter what the shipper's location. A key phrase in all sales tax law is how your state, city, county, etc, determines the "point where ownership changes hands." To some it's the shipping point, to others, the receiving point. Utilization of third-party carriers, e.g. UPS, FedEx, Yellow Freight, etc can actually muddy that definition in some jurisdictions. and as davidmg noted, the worse the economy gets, the more states will diddle with their definitions of taxing jurisdiction and point-of-sale.

The upside, at least for now, is your server is viewed as part of your "communications" infrastructure, like your telephone central switching office, and has no basis regarding location for the purposes of legal.

1) check with a tax attorney where you are physically located.
2) all of the big players, use services and software like Vertex, that manage all of the tax handling for them. There are also much more affordable options in the way of software or services. Many third-party purchase gateways and shopping cart systems provide tax calculations as part of their services.

Good luck. And as many have pointed out this is serious stuff. As a former governmental department head I know that your local constabulary will padlock your doors if you don't pay your sales tax.