Destination-based sales tax collection. What if you do not know the destination's address?

Question

A scenario: I am selling online software and I provide advanced features for premium members. As far as I understand I do not ship or deliver anything physically. I also do not ask customers for their address information and can accept any payment (e.g., bitcoin).

What sales tax do I charge if I do not know their county and address? Can I assume that the sale happened at my "store's" location and charge them a standard sales tax based on that?

Answer 1

The answer may vary depending on your state. If you're in a state that's a member of the Streamlined Sales and Use Tax Agreement,* there's a designated heirarchy for sourcing sales of digital goods:

First, if you're making delivery to the customer at your location, source to the location where you make the sale. If not, source to the location where your customer will receive the product.

Neither of those works for you, so you'd continue down the list to the first one you can apply:

1. The purchaser’s address that you maintain in the ordinary course of the your business;
2. The purchaser's address obtained during the consummation of the sale;
3. The address where you first make the product available for transmission or the address from which you provided the service.

By my reading, that means that in the absence of an address, you basically come back full circle and source the sale back to your own location.

*Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, Nevada, New Jersey, North Carolina, North Dakota, Ohio, Oklahoma, Rhode Island, South Dakota, Tennessee, Utah, Vermont, Washington, West Virginia, Wisconsin and Wyoming

Answer 2

You have to learn what you need to in order to comply with tax law

For example, for australia:

You must charge Australian GST on a sale of imported services and digital products if:

• the sale is connected with Australia

• you are registered or required to be registered for GST

• the sale is made for payment and as part of conducting your business (or it is treated as being part of your business because you are an electronic distribution platform operator)

• the supply is not GST-free or input taxed.

A sale is connected with Australia if the imported services or digital products are sold to an Australian consumer.

GST does not apply to sales of imported services or digital products made to Australian GST-registered businesses who are making the purchase for business use.

So you must determine which of your non GST-free or input taxed sales are to “Australian consumers” or non-GST registered businesses or GST-registered businesses who are not buying for business purposes. You need to do this even if you aren’t registered because registration depends on annual revenue so you need to know this to show you didn’t have to register.

OK. One country down, 195 to go.