You only charge sales tax on items the buyer takes possesion of in a state you are registered in.

If you are registered in NY, you charge for items shipped to a NY address and you charge if you sell in-person in NY. (If you sell in person in other states, you might be required to register there too.)

In NY you charge the sales tax rate for where the buyer takes possesion of the item too, so if you ship to NYC the rate will be different than if you ship to Albany. That’s where the headache comes in.

If you ship out of state/country, you don’t charge sales tax and it is up to the buyer to report use tax to their own states.

It would be nice if they gave us the option to set up rates by county, but since that’s not part of the info folks put in when they sign up they’d have to change that too.

In the mean time, charging them 9.5% when they owe less, even if you refund the overage later, is not allowed in NY.

It is ok to include the tax in the price if you are doing a show or something, but if they get a written receipt (such as Paypal, a cash register receipt or a handwritten one), you must break the sales tax out for them on it so they can see how much is paid to the state on their purchase.

Calculating tax later isn’t legal in many states, so I would advise calling the state before doing that. It is sometimes referred to as “backing out taxes”.

thank you for all this–brilliant, clear presentation. i have one question:

you say it’s all right to pay your customers’ sales tax, as long as you inform them (so they don’t pay it twice). does this mean that i don’t need to itemize on their receipt? it seems easier to me somehow to calculate tax later, but maybe i should not be taking this risk.

For more on Google Checkout, see this blog post:

If someone from NY paid before the revised invoice, we usually refunded the payment and sent an email to explain why, then we sent an email invoice with sales tax.