Why Am I Being Charged Sales Tax On A XBOX Live Subscription?

Victor found a great deal on an XBOX Live 12-month subscription card from Buy.com, but was surprised to see that the company charged him sales tax. No other online vendors that he tried charge sales tax on the cards––which are, after all, more of an intangible item, akin to a gift card.

He wrote to Consumerist:

I bought the deal of the day on Ebay (offered by vendor buy.com), which was an XBOX Live 12 month subscription card for $34.95, almost half off retail. Good deal. But on checkout, I found out that Buy.com (or Ebay, I can’t tell) seems to think this is a taxable item. It is not. I have attached checkout invoices from Best Buy, Toys R Us, and Walmart showing that ALL of them correctly do not charge tax. But Ebay/Buy.com does think this is taxable.

Here’s that Buy.com checkout screen:

Here are the other vendors Victor tried (click thumbnails to enlarge):

Four years ago, we learned that GameStop shouldn’t have been charging sales tax on the cards in Illinois. But what about Buy.com?

Victor wrote in, and received this answer:

Hello Victor,

Thank you for contacting Buy.com regarding your order number 66530780.

It is mandatory for us to charge sales tax for orders shipped to:

* California
* Connecticut
* Illinois
* Massachusetts
* Maryland
* New York
* Tennessee
* Washington

In order to ensure we do not violate the tax regulations for these states,
Buy.com charges sales tax on shipping amounts as well as on product amounts.
The sales tax is automatically computed to these orders, and Buy.com remits
all taxes collected to the state.

You can read about our complete sales tax policy on our website at:


Thank you for your inquiry, please do not hesitate to contact us if you have
further questions!

You know, nice form letter, but not an answer to his actual question.

Victor lives in California, so we phoned up the California Board of Equalization’s media hotline. They told us that they, too, consider prepaid Xbox cards to be similar to gift cards, and do not charge sales tax on them. Any vendor that attempts to do so is wrong, and it’s probably a shopping card software error. When you encounter it, let the company know.