Save sales tax on Office 365 and more

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It’s possible to save even more on Office 365, software downloads and ebooks.  Here’s how.

Microsoft, like many online retailers, now charges US state sales tax for virtual products like Office 365 subscriptions.  That can add up to 7.5% to the cost of an Office 365 subscription, maybe more.

Sales Tax is usually charged based on the billing address of the credit card (because there’s no physical delivery address).

  • Microsoft charges US state sales tax on Office 365 packages including Home and Personal ‘subscriptions’. Also Office 365 cloud services like Exchange Server hosting.
  • Amazon does the same thing for downloadable software and Kindle ebook purchases.
  • Apple charges state sales tax on most iTunes purchases including apps, music and ebooks.
  • Google Play charges tax on books, magazines, music and video.
  • Some streaming services like Netflix may also charge state sales tax (taxes on streaming and cloud services varies between states but the trend is to impose taxes on this growing market).

The change has come over the last few years.  There was a time when Internet retailers could avoid US state taxes entirely or only charge in the state they did physical business.

Sales Tax rates vary from high 10.5% in Puerto Rico and 7.5% in California.  Alaska, Delaware, Montana, New Hampshire and Oregon have no state sales tax.

It’s those 0% sales tax states that offer an opportunity to anyone who buys a lot of downloadable (ie not physical delivery) items.

The savings depend on your buying habits. Before doing anything, look at what you buy online and add up what you spend on ‘virtual’ products.

An Office 365 Home subscription (say $100 but you can get Office 365 for less) plus some ebooks and maybe some downloadable software or subscriptions can add up.  Adobe Creative Cloud subscription costs $600 plus tax.

First, establish an address in one of those no sales tax states.  Maybe you have a friend there?  Or look online for a reputable mail redirection service – these services will give you a physical address in that state.  Little, if any, paperwork may go to that address since everything is done online.

Then get a credit/debit card using that address.  Maybe change the address on an existing bank account to the low-tax state (that might have other consequences so check first).  A more cautious approach is to get a pre-paid debit card or low-cost bank account with linked Visa/Mastercard debit card.  Pre-paid debit Visa/Mastercards can be used online and can be ‘topped up’ as necessary.  There are even ‘virtual’ cards where you get the ‘card’ number, expiry etc but no physical card.

Sounds complicated?  There’s a bit to setup so it’s not worth it just for an annual Office 365 Home payment.  If you’re buying a lot of online/virtual products then the small cost/hassle is outweighed by the savings.

Sign of the Times disclaimer

This suggestion is based on the best of our knowledge and information from other readers.   Use at your own risk.  Savings not guaranteed.  Don’t run with scissors.  Leave the seat down.  Don’t forget to ring your mother.

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