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What if My Customer Doesn’t Want to Pay Sales Tax?


 

With the expansion of nexus policies in many states, it’s getting more and more difficult for consumers to make online purchases that are tax-free--tax authorities are finding more and more ways to make sure online retailers have nexus in their states.

This leaves some consumers looking for alternative methods of avoiding taxes. As an online retailer, how do you handle customers who want to make a purchase without paying any sales tax, or those customers who promise to pay the use tax instead?

What About Use Tax?

Most ecommerce platforms automatically add tax to the price of the sale at checkout, so there's no way for them to avoid paying. But what if the customer bypasses your checkout system and sends you a private message asking you to allow them to purchase a product without paying sales tax?

The bottom line is that you, as a seller, are ultimately responsible for the amount of sales tax due on your total sales, regardless of any arrangement the customer proposes.

For example, if you sell high-end jewelry and a customer promises to pay use tax on it instead of sale tax, it might seem reasonable to allow it -- either way, the tax will land in state coffers, right? But when it comes time to file your return, how would you prove that the buyer paid the use tax?

A representative from the California Board of Equalization put it this way: “The seller is responsible for sales tax on all reported sales, whether the buyer promises to pay use tax or not.” In other words, no matter what, when you make a sale, you owe the sales tax stemming from that sale to the state.

No Way Around It

But what about those sellers who advertise the promotions that promise no sales tax? It’s simple: They pay the sales tax out of their own pockets. (And probably raise the price of the product to cover it.)

So, the next time a buyer asks you to forego the sales tax on a purchase, you have to make a decision. Will you agree to not charge them sales tax and instead take the money out of your own pocket? Or will you explain to the customer that the sales tax has to be paid and there are no exceptions?

It’s your call, but remember, there is no legal way to make a sale in a state where you have nexus and not pay the state the appropriate sales tax.


Avalara Author
Suzanne Kearns
Avalara Author Suzanne Kearns