I went to renew my prime membership today as it expired on December 31 and was surprised to see that they want to charge me a sales tax so rather then the 79.00 it was, it is now 85.12. Can someone explain to me why I have to pay ( not rudely or ignorantly as I am truly curious) tax on this membership but not on say Costco or Sam's Club? Amazon will still be making money off of me from the items I do purchase so I am uncertain why they tax to stay a prime member. If I am not a member and spend 25.00 my shipping is free so I am not charged a tax to ship so please don't tell me the reason for the tax is to cover the shipping. Just a curious longtime member/shopper wondering why....
>>>> Can someone explain to me why I have to pay ( not rudely or ignorantly as I am truly curious) tax on this membership but not on say Costco or Sam's Club? <<<<
To accurately tell you, we'd need to know what state you're in. State laws and regulations determine what is taxable, and what is not taxable.
For example, the California tax code defines a store membership this way:
========== (A) the retailer sells its products only to members and the membership fee exceeds a nominal amount, or (B) regardless of the amount of the membership fee, the retailer sells its products for a lower price to a person who has paid the membership fee than to a person who has not paid the fee. ==========
Amazon sells to people who purchase Prime, and to people who don't purchase prime, and they do not charge lower prices to someone who has bought Prime. On the other hand, Costco and Sam's Club won't sell to you at all unless you're a member.
Now, assuming you're in California, your next question might be concerning why if shipping is non-taxable, why do they charge tax on Prime. Well, that's because for a shipping charge to be non-taxable, it essentially has to be a pass-through of what the carrier is charging. But Prime gives you a whole year at a flat-rate, and also covers handling, as well as shipping, not to mention streaming video, and other non-shipping things. So it doesn't qualify as non-taxable that way, either.
If you're not in California, I apologize for using the wrong laws to answer your question, but they were the answers I had handy, having looked specifically into this for someone from California already. I've seen others who have looked into the details of a couple other states, and while the wording may be slightly different, it often comes down to the same concepts: Prime is not a "membership" as defined by those state's laws, and the included shipping doesn't meet a qualification to be *only* shipping charges, either.
So depending on the state, you'll find the details in your state laws and tax code. But in general, based on what Prime is, I would be surprised to find a state with sales tax in which it isn't subject to that sales tax.
Historically, in California, tangible items have always been taxable (except for most grocery type food items, prescriptions, etc) while services have always been non-taxable. Buying a movie that arrives in the mail and is delivered via DVD or Blu-ray, is taxable; however, streaming a movie to my TV is non-taxable. Buying a pre-packaged burrito at 7-11, non-taxable; buying same burrito but heating it first in the 7-11 microwave, now taxable. (Are other states this screwy or is it only California?)
I would consider Prime a service (also like Costco/Sam's Club) and since my prime membership is about to be renewed, if I see a tax like S.Maynard has, I am definitely going to question why I am being taxed on what is essentially a service or membership. Unless a new law, of which I am ignorant of, has taken effect... CA legislators have, for years, tried to find ways to tax services and/or labor costs - usually they back off because of potential voter backlash. But perhaps this is no longer the case.
So, my question to you, sir, is it possible, with the 800+ laws that California has enacted to begin 1/1/13, that now some services are taxable? I ask because you appeared to have recently familiarized yourself with the tax laws enough to respond to this thread and I'm hoping you could look also look this up. If not, then it's possible that Amazon has applied taxation across the board to California residents (which just started a couple of months ago on items it sells to the residents) in error?
Our California governor Gerald Brown and his father acting in concert has raised the sales tax in California from 3% to 10% in some locations to fund their pals at the public unions. It is nothing less than shameful that these political jackals have taken the sales tax that was saddled on California to fund the schools, and turned it into executive salaries with gold plated healthcare and pensions for ordinary peace officers, teachers, firemen, and clerks who all work traditional blue collar jobs. Our retread Gov. Brown has expanded the range of tangible personal property to reap huge rewards for his cronies. They have added most prepared food, any theme park food, carbon dioxide (stored in soda pop), magazines and newspapers, memberships (I cannot find a tangible link here), interstate taxation on goods, salt (I know it is food, but Gov. Brown thinks we use too much, so he taxes it), and cell phones (they are a utility, you don't pay tax on the gas pipe to your house, or the phone installed by the phone company, so why on a cell phone at a "unactivated" stupid high price? I bought a phone for $48 and was charged $54 tax! Now the Democrats are after the tax on homes to raise rates so high seniors will need to move into the inner city rabbit warrens they are selling as good for the enviornment.
Tell your state leaders that their attachment of taxes to memberships is offensive to the traditional notions of American justice and fair play, and their support of could lead to unemployment. Theirs.
>>>> So, my question to you, sir, is it possible, with the 800+ laws that California has enacted to begin 1/1/13, that now some services are taxable? <<<<
They didn't have to enact any new laws. Prime already was taxable.
We, and even Amazon, may refer to it as a "membership", but it does not meet, and never has met the legal definition of what's required to make a "membership" non-taxable.
Costco, for example, is a non-taxable membership because you cannot buy anything at Costco without being a member, and the membership fee is more than a nominal amount.
(There is a chain in Oregon called Bi-Mart that requires a membership, but that membership is $5 for life. That would be considered a nominal amount, and thus would be taxable.)
The idea that tangible things are taxable, and services are not is way beyond an over-simplification of the California sales and use tax code. It's not even close enough to what the code really says to even be in the ballpark.
Incidentally, who is selling something is irrelevant to whether it is taxable or not, too. Nearly everything you've been buying on Amazon has always been taxable. It is only recently that the State of California has been able to get Amazon to do the collection of the tax. When the seller does not collect the tax, you are (were) still responsible for paying it. When you pay it directly, it is called a "use tax". When the seller collects it for the state, it's called a "sales tax".
But I can assure you that there is no exemption from sales or use tax that applies to what Prime is, and that is not something new.
Here's a link to the actual regulation: http://www.boe.ca.gov/lawguides/business/current/btlg/vol1/sutr/1584.html
Interesting thread. I had to go check my Prime membership, which just renewed and indeed, I have been charged tax for the first time. I'm in PA and just last year in September or October, Amazon started charging us sales tax. I guess it extends to the Prime membership, too. It's always been my understanding, though, that in PA, intangible things are non-taxable. I'm going to have to look into this further.
Update - after googling a little and also looking back on some of my past iTunes purchases it seems that PA subscribes to the taxing of digital downloads that can be manipulated (executable computer software, applications, games, etc.) but not to intangible ones like music or graphics. Which makes me wonder how Prime membership fits into all of this. I don't see how that is something tangible that could be taxed.
>>>> I'm in PA and just last year in September or October, Amazon started charging us sales tax. I guess it extends to the Prime membership, too. It's always been my understanding, though, that in PA, intangible things are non-taxable. <<<<
In PA, services performed on taxable items are subject to sales tax, so shipping and handling of taxable items would be taxable. ( https://revenue-pa.custhelp.com/app/answers/detail/a_id/214 )
Although some Prime-eligible items are non-taxable, there is no provision for pro-rating, nor can I think of a good way to accurately calculate it at the time Prime is purchased. The shipping and handling of taxable items isn't incidental, but rather are a material part of Prime, so there's no valid argument for Prime to be non-taxable.
There is a Help Page on sales tax. This was copied from that page:
Kindle books, subscriptions and active content titles sold by various publishers are subject to sales tax based on the publisher's tax reporting obligations and the taxability of digital books in those regions. As a result, sales tax for Kindle books sold by the publisher may differ from the sales tax to which you've been accustomed for Kindle products.
For Kindle books, subscriptions and active content titles sold by various publishers to locations outside the U.S., the publishers determine the tax to be included in the price.
"Although some Prime-eligible items are non-taxable, there is no provision for pro-rating, nor can I think of a good way to accurately calculate it at the time Prime is purchased. The shipping and handling of taxable items isn't incidental, but rather are a material part of Prime, so there's no valid argument for Prime to be non-taxable. "
But Amazon Prime is not paying just for a shipping service. I don't see how the Prime membership can be taxed. Some could buy Prime just to get unlimited videos, which wouldn't be taxable. Plus, I don't see that PA's tax laws have changed - just some interpretations. Intangible items are still not taxable. What is tangible about the Prime membership?
If services performed on taxable items are subject to sales tax, then why don't we have to pay tax on each order for what the shipping would have cost instead of just the sales tax on the $79 membership?
>>>>> But Amazon Prime is not paying just for a shipping service. I don't see how the Prime membership can be taxed in this case. If services performed on taxable items are subject to sales tax, then why don't we have to pay tax on each order for what the shipping would have cost instead of just the sales tax on the $79 membership? <<<<<
You don't pay it on each order because there is no shipping cost associated with the order. And you do pay it on Prime because something that is a mix of taxable and non-taxable services defaults to being taxable. They don't (and for all practical purposes can't) itemize the difference separately, so the whole price becomes taxable.
I found this discussion by doing a search... I too am one of the irritated California Prime members that was surprised to see I was charged TAX on my "membership" fee! Although it's not going to make me do something crazy like declare "I'm leaving Amazon!" or other silliness, it does really piss me off! As a Prime Member since 2006 (and almost 2,300 orders since 1998), I'd at least expect some notification of the change.
Amazon has computers programmed to follow each state's laws. That doesn't mean they have it programmed correctly or the person doing the programming didn't misread/not understand the laws.
I'm also wondering (after reading some of the "digital taxing" comments if the tax isn't allowable because Prime Members are now allowed "free" movies/TV & a "free" book (to borrow) each month. Sounds kinda nutty but so does the rest of this.
I had a (somewhat) similar complaint a few months ago when I realized I'm being charged tax on any additional shipping charges (ex: $3.99 to upgrade to overnight shipping). I carefully reviewed both Amazon's posted policy & California's tax law. According to that, the tax was not legal.
I contacted Amazon (who said they didn't have a "tax department" but would forward my concern). While I really didn't care about the few extra cents my concern was more for the Company. What if they are overcharging by taxing on shipping to thousands & thousands of customers? After reading the wording on the "tax" website I directed the CS mgr to he completely agreed. I have no idea of course if anything was ever done.
Oh, we didn't renew our Costco membership this year (4 kids are all grown & it's cheaper to have Amazon deliver to my door, even if the price of items are higher, because I don't have to drive 60 miles round trip).
What we did do: gave my sister-in-law cash to buy six $10 cash cards (and treated her to lunch -at Costco, lol- for the favor). We can shop with zero membership fee! I hand the cash card to the cashier at checkout and pay the difference in cash (or debit card, just not by check). And no, we are NOT charged an extra 5%! In 5 months we've only gone twice and once was a trip for my parents( who both had colds & couldn't go themselves). You can purchase items at the same price as members without a membership!
Anyway, I'm calling to ask for a promotional credit to cover the tax (so I can stop feeling annoyed, lol)!