Amazon Overcharging Digital Purchase Tax

[sky144]

What is the name of your state? Florida

I noticed after a recent film rental through Amazon.com that they had charged 0.41 cents in tax on a 2.99 purchase, a tax rate of almost 14%. In my local jurisdiction the tax rate is about 7% and all physical purchases I have made from Amazon have been at that 7% tax rate, but upon closer inspection all of my digital orders have been taxed at 14%.

I contacted them to ask about it and I was told that it was a "flat tax rate for the entirety of the US". I am unsure to the knowledge of the customer service representative as they also stated it was that price to "recoup some cost of the purchase", to which I asked "so some of that tax is really apart of the cost of the rental" and they responded "yes".

Feeling unfulfilled, I spent several hours searching for any additional state taxes that could apply to digital orders in Florida and the only other tax I could find was a "Florida State and Local Communications Services Taxes" which Amazon does have a page on in their tax section, but even considering that it would be nowhere near 14%.

My question is simply this; Can a company charge any tax they want, and list it as "Tax Collected" on the invoice?

Thank you for any replies in advance,
- Sky

 

[LdiJ]

What is the name of your state? Florida

I noticed after a recent film rental through Amazon.com that they had charged 0.41 cents in tax on a 2.99 purchase, a tax rate of almost 14%. In my local jurisdiction the tax rate is about 7% and all physical purchases I have made from Amazon have been at that 7% tax rate, but upon closer inspection all of my digital orders have been taxed at 14%.

I contacted them to ask about it and I was told that it was a "flat tax rate for the entirety of the US". I am unsure to the knowledge of the customer service representative as they also stated it was that price to "recoup some cost of the purchase", to which I asked "so some of that tax is really apart of the cost of the rental" and they responded "yes".

Feeling unfulfilled, I spent several hours searching for any additional state taxes that could apply to digital orders in Florida and the only other tax I could find was a "Florida State and Local Communications Services Taxes" which Amazon does have a page on in their tax section, but even considering that it would be nowhere near 14%.

My question is simply this; Can a company charge any tax they want, and list it as "Tax Collected" on the invoice?

Thank you for any replies in advance,
- Sky

To be honest, I have not heard of this before now, and have not rented a movie from Amazon in quite some time, but based on what you have posted here, I won't be renting a movie from Amazon in the future.

 

[adjusterjack]

Can a company charge any tax they want, and list it as "Tax Collected" on the invoice?

Obviously Amazon CAN do it because Amazon DID do it.

As for "a" company, there are hundreds of thousands of "companies" in the US that charge sales tax on rentals and/or purchases and I can't speak for any of them.

I recently bought the new season of Dr Who for $18.99 plus $1.63 sales tax which is 8.6% which is the proper sales tax here in Phoenix.

I don't know if there is a difference between renting and buying. Were you sent a DVD or did you watch online.

Try calling your local sales tax agency and see if they know anything.

 

[sky144]

Thanks for the replies.

I guess I should of said, "Is it legal" rather than "Can" but I figured being on a legal advice website and all...

I also assumed the CS Representative was just trying to get me off the phone, and that the 14% tax was probably a Florida thing rather than an country-wide thing, so thank you for confirming that the tax on Amazon is regular where you are.

I'm not really planning on doing anything, I just wanted some advice on if I was getting ripped off for being in Florida or just in general. Either way I probably won't buy anything digital from them moving forward.

Edit: Also to answer the last part of your question, it was a digital film rental, so it was streamed online. I might try calling the local tax agency just to see if there is some hidden Florida tax I missed.

 

[Taxing Matters]

As far as the tax agencies are concerned, as long as Amazon collects the right amount of tax and remits it to the agency Amazon has complied with the law. However, misrepresenting what is being collected as a tax when part of it is really intended for something else may violate federal and state consumer rights laws and/or laws against deceptive trade practices. I recall that not long ago a cell phone carrier got dinged by the Federal Trade Commission (FTC) for doing something similar, listing bogus taxes in the long list of add on charges you see on a cell phone bill, when no such tax existed. You might contact the FTC about it and your state's consumer protection agency or state attorney general. I just checked Amazon's movie rental myself, and found that it applied a tax of 15 cents on a 3.99 movie rental, for a total of 4.14. That's a rate of 3.75%, higher than my state's base rate, but lower than it would be with all the local taxes added in. So clearly Amazon is not charging 14% nationwide. The invoice just lists "taxes" and does not break it down to exactly what all taxes are being collected. That's not very helpful. It may be that Amazon is doing it right, but without more information it is impossible to figure out for sure.

Note that there are over 7,000 different sales tax jurisdictions in the U.S., with differing rates, and differing goods/services that are subject to the tax. This makes collecting sales tax for mail/internet order firms a real challenge, something that I think the Supreme Court did not fully appreciate when it opened the door last summer to allow states to impose tax on all such sales to its residents. Amazon is big enough it can gather the information and design a program to deal with all those different jurisdictions. But given how many there are there is certainly the possibility for unintended mistakes to creep in.

 

[sky144]

Thank you Taxing Matters, that was very helpful. I understand how complicated tax jurisdictions can be and I'm sure Amazon wouldn't purposely overcharge as they should be big enough to set up their tax system the right way.

I'll try to do some more research on my own before I contact anyone like the FTC, and I might try to just ask Amazon again for an actual breakdown of which taxes apply, although it seems to be beyond the realm of their regular customer service representatives.

Thanks again.

 

[Taxing Matters]

I'll try to do some more research on my own before I contact anyone like the FTC, and I might try to just ask Amazon again for an actual breakdown of which taxes apply, although it seems to be beyond the realm of their regular customer service representatives.

I'd be suprised if Amazon gave their customer service reps access to full tax information on purchases unless they trained the reps in the sales tax issues, too (and I don't see it undertaking that kind of training). The area is complex and really they should just tell their reps not to get into detailed discussions of tax charges on the accounts as they might get it wrong and create even more confusion.

 

[sky144]

I'd be suprised if Amazon gave their customer service reps access to full tax information on purchases unless they trained the reps in the sales tax issues, too (and I don't see it undertaking that kind of training). The area is complex and really they should just tell their reps not to get into detailed discussions of tax charges on the accounts as they might get it wrong and create even more confusion.

That's true, but then I wouldn't really know who to contact at their company. I doubt their legal department would waste time discussing taxes, and it's not like their financial people are going to be fielding calls from customers. It seems like one of those gray areas where no one on the client facing front is really capable of answering it directly.

 

[PayrollHRGuy]

Your post had be worried so I checked my last 10 digital orders. All of them charged the correct total for my locality (the combined amount of state, county, and city.)

Is your zip code shared with an area that has a higher tax rate? What I mean by that is do you live right outside of a city that has an additional tax?

 

[LdiJ]

Your post had be worried so I checked my last 10 digital orders. All of them charged the correct total for my locality (the combined amount of state, county, and city.)

Is your zip code shared with an area that has a higher tax rate? What I mean by that is do you live right outside of a city that has an additional tax?

You just made me go check my last few orders as well.

 

[Zigner]

I wonder if the OP is using a VPN...

 

[PayrollHRGuy]

I wonder if the OP is using a VPN...

I don't think that would be the issue. If you look up my world facing IP address it would look like I was in Longview TX and I'm not even in Texas. All of the mailorder Tax databases I've seen work based on Zip Code and all of the mailorder software I've seen base it on the shipping address.

 

[Zigner]

I don't think that would be the issue. If you look up my world facing IP address it would look like I was in Longview TX and I'm not even in Texas. All of the mailorder Tax databases I've seen work based on Zip Code and all of the mailorder software I've seen base it on the shipping address.

Yeah was just a shot...

 

[sky144]

Hey guys, just a few answers for those who asked.

No, I don't use a VPN when using Amazon, all of the account information is set up for my local area.

I don't believe there is any applicable extra taxes in any of my surrounding areas, and certainly nothing I don't know about in the zip code where I live. What's odd is that regular physical purchases on Amazon (from Amazon.com directly, not through third parties) are charged at the 7% tax rate. So whatever tax it is, it is SPECIFICALLY on digital purchases.

Since many of you checked I'm pretty sure now that it's just a Florida thing, or possibly something to do with a specific part of Florida. I have some friends in North Florida (I'm in the south-east) who I'm going to contact to see if they get charged the same tax.

One weird thing to note is that I can't find any other digital services (Apple, VUDU, Sony, Comcast (my ISP)) that charge 14% on digital film rentals, so whatever it is, Amazon seems to be the only one applying it presently. I know some areas (like Chicago) have an "Entertainment" tax, but as far as I know we don't have anything like that here.

 

[PayrollHRGuy]

It would certainly be worth another call or email to Amazon. It may simply be a glitch in their system. If you aren't happy the answer you get ask them to escalate the call to a supervisor, lather, rinse, repeat until you are happy with the answer.

From https://www.amazon.com/gp/help/customer/display.html/ref=hp_left_v4_sib?ie=UTF8&nodeId=202074730

Tax on Digital Products and Services
Some states consider electronically delivered products, services, or subscriptions taxable and may be subject to state and local jurisdiction tax.
To determine this location, Amazon evaluates the address information available in the customer's account which can be the billing address associated with the method of payment or the country of residence a devices is set to.
Examples of digital items that may be subject to tax include:

• Ebooks
• Movies
• Music
• Ringtones
• Photographs
• Magazine and Newspaper Subscriptions
• Digital Gaming
• In-Game Currency
• Gaming Subscriptions