Making online sale to individual from another country. Do I collect sales tax?

[GronlundNewcombGuitars]

I am a citizen of the US. The state of Maine to be precise. Maine has a 5% state sales tax.

I build custom guitars. I have been doing it for a few years as a hobby and it has recently become a part time profession.

Right now, I am working out the details of a custom build order for a gentleman from France. He came across my work online and reached out. We have spoken extensively through email to plan his instrument. When the guitar is completed I will be shipping it to him via FedEx. We will never meet in person. He is going to wire a materials deposit now and then the remaining balance when the instrument is completed.

I am new to managing the taxes and business oriented elements of all this. Do I actually need to charge this French citizen a sales tax?

[vangogh]

I'm hardly an expert when it comes to sales tax, but I don't think you would need to charge any sales tax in this instance. Sales tax is collected on a state level and I'm pretty sure you only need to collect sales tax when you sell something to someone in the same state where you have a physical presence. That's generally how things work online and why many online stores don't charge sales tax. Even though it doesn't come up as often offline, I think similar rules actually apply. In this case though the transaction is clearly taking place online.

[Jim Tate]

I agree with Steven. You may want to get input from a licensed accountant.

[Business Attorney]

The answer from Steve (vangogh) is accurate. A sales taxes collected by the seller from the buyer. Because your buyer has no nexus (basically, connection) with the state of Maine, the state of Maine cannot impose its tax on the buyer.

If, on the other hand, your French buyer decide to come to Maine pick up the guitar in person, even if his plan was to immediately leave the state with the guitar and return to France, the mere fact that he was physically in Maine to complete the sale would be sufficient to require that he pay (and you collect) sales tax on the transaction.

[vangogh]

Good to know I can get something right even when I'm not sure what I'm talking about.

[Business Attorney]

vangogh, you are definitely a Renaissance Man, even though your namesake artist missed that period by a couple of hundred years.

[vangogh]

I should have gone with Leonardo or Michelangelo. Oh well. Live and learn.

[chrismarklee]

Very good question. I know someone who bought cigarettes online and sales tax was not charged. Now the state she lives in came after her for the sales tax.

[vangogh]

Really? I know the idea is that the consumer is supposed to report the purchase and pay the sales tax, but can't say I ever heard of a state coming after people for not doing that. Seems like it would cost more to track down the people and get them to pay than what they'd get in return. Not saying it didn't happen, but it seems odd to me or maybe a unique case with more details.