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.


Edit Your Comment

  1. eldergias says:

    Well then, apparently sales tax on FREE shipping must be $2.71

  2. rugman11 says:

    I just tried Amazon (since I live in a state that Amazon taxes) and they didn’t charge tax either. It must just be a glitch in Buy.com’s tax assessing software.

  3. TrustAvidity says:

    GameStop is very on-and-off about this. I worked there for a while in south-eastern Wisconsin and it seemed almost weekly membership cards switched between being taxed and not.

    • Blueskylaw says:

      In Connecticut, if you buy marshmallows from the store and you want to use them in a cooking recipe, they are supposed to be tax free. If you buy marshmallows just to eat them as candy, they are supposed to be taxed. The grocery stores just tax everything and flip flop on policy, never giving you a direct answer.

      • RandomHookup says:

        If I go to my office cafeteria, a 20 oz. Coke from the vending machine in the lobby is $1.75. If I buy it from the register, I get charged 13 cents more in tax because it’s now part of a meal.

        • Blueskylaw says:

          If you went to UConn and bought a soda from the machine, it would cost $1.50. If you went to the bookstore and bought a soda it would be $1.50 + tax + deposit. If you went to the bookstore and bought a soda and showed your ID, the soda would cost $1.50.


  4. Blueskylaw says:

    “Buy.com charges sales tax on shipping amounts as well as on product amounts”

    I didn’t know shipping something is considered along the same lines as selling something. Sounds more like a money grab from states in desperate financial circumstances.

    • RandomHookup says:

      While the states might be desperate, the answer above from the CBE sounds like it’s really a category error at Buy.com.

    • Evil_Otto would rather pay taxes than make someone else rich says:

      Some states charge sales tax on shipping. We have to take that into account when we give quotes.

  5. AustinTXProgrammer says:

    If I lived in one of those states I probably wouldn’t do business with buy.com. Tax on shipping? Since when?

  6. sooperdana says:

    No idea if this is related, but when my husband bought the downloadable content for Skyrim last night, xbox charged him sales tax. I don’t remember them charging tax before that purchase.

    • golddog says:

      I recently received a refund from Sony b/c they mistakenly we charging sales tax on PSN purchases.

  7. golddog says:

    So we know they’re collecting the tax. Are they submitting it to California?

  8. cordo says:

    Better yet, contact your local State (not Local) Board of Equalization office. There is a toll-free number in the phone book. The Board does not know how wide-spread a problem this is unless people tell them. The company is more likely to listen to a contact from the state agency than to a consumer. Since sales of tangible personal property are presumed to be taxable unless they hear from the Board that they are not, the company will collect tax from the consumer if they are confused.

  9. PragmaticGuy says:

    Sales tax shouldn’t be charged on shipping either. It’s like the Post Office charging tax on stamps.

    • pgr says:

      I once mailed a package at the post office (while I was vacationing in Canada) and they charged me a 14.5% tax on the postage!

  10. do-it-myself says:

    Where are these “non-taxes” going then?

  11. 2 Replies says:

    Sooo is there a follow-up planned?
    Is there a response from Buy.com about their incorrect information?

    Their innitial response says it taxes on “Items shipped”, so personally I’m inclined to believe the CS rep who responded was just confused.

    Victor and/or Consumerist should follow up because the (confused?) Buy.com rep obviously isn’t going to pull the chain of command for this error to be fixed.

    I guess until we hear the issue is fixed in a Consumerist follow up, the rest of us should just avoid purchasing gift cards from Buy.com on ebay (unless we’re happy with giving Buy free money (labeled “Sales tax”).