From what i understand with all this....if you use paypal you do not get taxed. Some reason it is exempt.....I used paypal after i was taxed on my first transactions with this account and was not taxed either. I have spoken to 2 friends who do live in california and they both have not been taxed when buying cp with paypal.
this sale tax is only applicable on physical goods you recieve in state.
Now if cryptic isnt registered in california as a business entity, and its off based in another state, you shouldnt have to be paying for that tax.
Its like when you order online out of state.
Even then there is no physical goods u take out of the store.
Grocery stores even dont charge tax, i dont see why cryptic is charging tax on a virtual item.
I didnt even get tax'd @ steam nor microsoft direct.
Its a very **** poor way for crytic to say they are rising the cost on points.
Which would of been a better PR instead of saying they will charge TAX.
IN all honesty, and better PR image, its best if you guys just said u were raising prices, instead of trying to sideline us with TAX.
This is just ridiculous. Taxes are assessed on Goods and Services. Not just goods, but both, and it varies by state. Usually its because the business or company has some asset registered in that state such as a warehouse, or office structure that forces the requirement to pay sales tax.
MA is notorious for trying to tax everything under the sun, so it wouldn't be surprising to me if they demand sales tax be paid or that they wouldn't allow the sale to take place to begin with in order to get their "fair" share. We know Cryptic is based in CA so that one is pretty obvious. I don't know what is up with Michigan, maybe its similar to MA in that they just demand the tax be collected, maybe Cryptic has a property registered there.
Grocery stores in several states actually charge tax on food. Please try looking up information before you go looney tunes on the internet.
As I mentioned above, I spoke to the State of California Board of Equalization and they forwarded my query for investigation. I got the following response:
State of California E-Mail Response
Board of Equalization
Information and Advisory Unit
Telephone 916-324-2883 • FAX 916-322-0187
Senior Tax Auditor, MIC:44
Reference #F10-09-066 - 0920 - 0921
Virtual Property Purchased For Use in an Online Game
Thank you for your recent e-mail requesting our advice regarding the proper application of the California Sales & Use Tax Law.
The answer given is intended to provide general information regarding the application of the tax and will not serve as a basis for relief of liability under Revenue and Taxation Code section 6596.
For your general information, the Revenue and Taxation Code provides that sales tax is imposed on the gross receipts from the retail sales of tangible personal property in this state. The sales tax is imposed upon the retailer for the privilege of selling tangible personal property at retail in California. The use tax is complementary (and mutually exclusive) to the sales tax and is imposed upon the storage, use, or other consumption in this state of tangible personal property, not subject to the sales tax. The obligation to pay the use tax is on the consumer.
Sales and Use Tax Regulation 1700, Reimbursement for Sales Tax, provides that whether a retailer may add sales tax reimbursement to the sales price of the tangible personal property sold at retail to a purchaser depends solely upon the terms of the agreement of sale. Subdivision (a)(2) of Regulation 1700, explains that certain presumptions concerning the addition of sales tax reimbursement are created by Civil Code section 1656.1. It shall be presumed that the parties agreed to the addition of sales tax reimbursement to the sales price of tangible personal property sold at retail to a purchaser if:
(A) The agreement of sale expressly provides for such addition of sales tax reimbursement;
(B) Sales tax reimbursement is shown on the sales check or other proof of sale; or
(C) The retailer posts in his or her premises in a location visible to purchasers, or includes on a price tag or in an advertisement or other printed material directed to purchasers, a notice to the effect that reimbursement for sales tax will be added to the sales price of all items or certain items, whichever is applicable.
Each retailer who adds to the sales price of tangible personal property sold at retail an amount from a consumer in reimbursement of the sales tax upon gross receipts shall compute the amount of reimbursement by reference to schedules prepared by the board pursuant to Civil Code Section 1656.1 or by mathematical computation as described below.
When an amount represented by a person to a customer as constituting reimbursement for sales tax is computed upon an amount that is not taxable or is in excess of the taxable amount and is actually paid by the customer to the person, the amount so paid is excess tax reimbursement. Excess tax reimbursement is charged when reimbursement is computed on a transaction which is not subject to tax, when reimbursement is computed on an amount in excess of the amount subject to tax, when reimbursement is computed using a tax rate higher than the rate imposed by law, and when mathematical or clerical errors result in an overstatement of the reimbursement on a billing.
Whenever the board ascertains that a person has collected excess tax reimbursement, the person will be afforded an opportunity to refund the excess collections to the customers from whom they were collected. In the event of failure or refusal of the person to make such refunds, the board will make a determination against the person for the amount of the excess tax reimbursement collected and not previously paid to the state, plus applicable interest and penalty.
If the retailer fails to refund the excess tax reimbursement to that person, the retailer would be required to pay such amounts to the state. Under no circumstances would the retailer be permitted to retain any excess tax reimbursement.
In your e-mail, you state you play Star Trek Online (STO), a subscription based Massive- Multiplayer Online (MMO) game. The game is "owned" by Atari, but the company that produces the game is called Cryptic and they are based out of California. The game servers are also located in California.
There are subscription fees to play this game. You have not been taxed on these fees. There is a "Microtransaction Store" attached to the game that sells virtual items that are used by your characters within the game. The store is called the Cryptic-Store. The Store sells starships, clothing, playable races, and other virtual items. In order to shop in the C-Store you first have to purchase Cryptic Points (CP) from your account page on the STO website. These CP are added to your account and then in the game you can click a button which opens the C-Store and lets you shop with your CP.
The CP purchase page states: "Prices are not inclusive of VAT and/or other applicable local taxes." You noticed that for a recent purchase of $6.25 you were billed $6.86. I assume this was 6.25 x 9.75 percent which equals $6.86. You did not get a receipt detailing the charges. When you inquired their support rep said you were being charged the applicable local tax.
You would like to know if it's legal for them to charge you tax on a virtual item.
California sales and use tax law section 6006 defines a sale as any transfer of title or possession, exchange, or barter, conditional or otherwise, in any manner or by any means whatsoever, of tangible personal property for a consideration. As defined in section 6016, tangible personal property means personal property which may be seen, weighed, measured, felt, or touched, or which is in any other manner perceptible to the senses. Tax does not apply to sales or purchases of cryptic points purchased on the STO website to purchase virtual items to use in the game. Virtual items are intangible and only tangible personal property is subject to tax.
If a retailer wishes to collect sales tax reimbursement from a customer they are required to indicate to their customer in some manner that sales tax will be added to the selling price. For example, they will generally create a sales invoice or other document that indicates the selling price and also shows sales tax reimbursement on the selling price. According to your information you were not provided with an invoice showing that tax reimbursement was added.
If you have already paid sales tax reimbursement to the retailer on a transaction that was not in fact subject to tax, you may request a refund of the excess tax reimbursement from the retailer. The law requires the retailer to either refund the excess tax reimbursement to the customer, or to remit the money to the state. It is the retailer’s choice as to which option to pursue. If a retailer refuses to refund the excess tax reimbursement, the retailer is required to remit the money to the state. If a retailer has already remitted any excess tax reimbursement to the state, the retailer may file a claim for refund with the state for the purpose of refunding the excess tax reimbursement to the customer.
I can understand your concern that tax was collected on an item that is not subject to tax. As part of the BOE’s administration of the sales and use tax laws, the BOE maintains an audit program for the purpose of verifying that taxpayer’s have reported the correct amount of tax. I will forward your concerns to the appropriate district office. However, due to confidentiality reasons, the BOE cannot share the results of any investigation with you.
I hope this information is helpful. If you have any further questions regarding this or any other issue, please write or call our Taxpayer Information Section at (800) 400-7115. You may also visit our website at www.boe.ca.gov.
I added the magenta and bolding in the two paragraphs above, but the other enhancments were the original letter that way.
Cryptic, I would like a refund on the $25.47 in taxes you have wrongfully charged me.
I did have further discussion with Cryptic and they just stonewalled me with a "talk to your Congressman" line. Which is silly. My Congressman might have input in the formation of a new law, but the existing law already covers this situation. I have spoke a few times with the State of California Board of Equalization (the government organization that collects business taxes in this state) and I was last told in no uncertain terms that Cryptic should not be charging tax in California for C-Points and that the BoE was forwarding the case to be looked into, but due to privacy issues they can not disclose those results to me.
The $25 is more a principal thing than caring about the money at this point. And what with life being one thing and another, I haven't made time/have forgot to pursue it. That and I hope the BoE's case will have made Crptic to stop their illegal taxaction. I haven't "needed" to purchase any more C-Points since then. When next I do, if I'm charged tax again, I will further investigate my legal options, probably by contacting a lawyer.