New York Sales Tax..California Transaction

OK, I understand that the State of New York has some interesting perspectives on how and when sales tax becomes applicable within their jurisdiction. I bought something online, it’s shipping from New York to California, and they are charging and collecting New York sales tax instead of California sales tax.

I also understand that New York is under the impression that sales tax is due on interstate transactions when the seller or buyer is located within New York or is otherwise subject to New York’s jurisdiction.

But what happens when that company also has a nexus in another jurisdiction, like say California, who also has very similar laws and regulations pertaining to jurisdictional collection? Shouldn’t the company be collecting sales tax on behalf of the jurisdiction where the actual “use” of the product occurs, which in this case would be California?

I think that, right now, you are required by law to pay California use tax on it, so you’re already in that unfortunate situation you are worried about. This page certainly claims that you are.

Are there any test cases winding their way through the courts to get the SCOTUS to smack this down via the Commerce clause, or do any lawyers want to come explain why it’s likely to withstand such a challenge? Presumably New York thinks that it will get away with it, right?

IANAL; I am not a tax expert; it has been several years since I worked in interstate sales.

That said, when did New York change its rules?

The rule under which we operated for over 20 years, (in a company that had missed a few reported taxes and then spent over a decade with auditors from most states hanging over our every sale), was that tax is paid in the taxing entity into which an item is shipped.

If the tax is paid by the buyer (collected by the seller) as part of the sale, it is sales tax, and if the arrangement is that the buyer will pay the taxing entity directly, it is use tax.

When I have seen situations such as you have described, it has always, (in my not unlimited experience), been a matter of the seller using some hasty tax calculation that assumes that they only have to collect/report their own state’s tax, completely oblivious to the actual laws.

In the situation you describe, I would guess that the seller is just doing it wrong and that California should legitimately attempt to grab their tax. If the sale is complete, I would think that you could apply to the state of New York, (and any municipalities involved), for a refund–which will eventually be returned to you, sans interest, many months after you need it.

It would be interesting to discover whether New York has actually changed the rules of the game or whether your vendor is simply an ignorant idiot.

Use tax or sales tax, it’s all the same money coming out of my pocket in the end, but the thing is that the company also has a place of business in California. So there is zero doubt in my mind that they should appropriately be collecting California sales tax, and not New York sales tax, which is fine by me since CA needs all the help it can get right now with tax revenues:)

In further discussions with the seller, it appears they are also collecting sales tax on the shipping and handling (for New York), which irritates me since I am not subject to tax on shipping that I am aware of (at least, not California sales or use tax).

In my own personal business experience, I know for certain that in California that Common Carrier Shipping is not a taxable item, however the handling for the order is taxable. This company has separated shipping and handling, so I know I am on the hook for the handling, but certainly not for the shipping.

It really seems to me that these folks are not conducting their business properly, unless they are relying upon some laws that I’m not aware of, but even when I’ve purchased goods from other vendors New York I’ve never seen them collect NY sales tax when they ship to me in CA.