Major Tax Flaw in Online Store - No Resolution from Tech Support

[Speedgraphic]

I run a film lab which uses an online store where customers can input their order.  They select how many rolls to submit, the service level etc, and then mail in their order.  After I process and scan their film, I send them a drop box link with all their image files.  Their film is stored until they fill up a box or wish to have it back.  So in the Square online store, I use 'digital delivery.'  

Because there is no shipping address entered, Square is charging my out of state customers sales tax.  I have called twice now to get this fixed and their only answer has been that this is some kind of oversight?  Their resolution was that I should go through each order and refund the tax charged.  

Overall it seems like the online store option is the red-headed step child around here.  You can't use the loyalty program with it, and the tax system doesn't even work.  If I set it as a shipping option I wouldn't charge out of staters sales tax, but Square keeps my $ until I mark the order as shipped, and then I have to send my customers a confusing email about a shipment that isn't happening.  

Does anyone have a solution for me?  This just seems like a crazy oversight...

[VanKalkerFarms]

I would say you are mostly right that the options aren't fully there for the situation like you are describing.   The online store is not a full-featured program for sure.  Sales Tax laws are super complicated and even more complicated when it comes to digital items because there are some states that don't charge tax on digital, some that charge a reduced rate and some that charge fully for digital items.  And the whole, if it is out of state, don't charge sales tax is 5 years ago thinking as you do charge sales tax in many states so even that isn't as easy as it used to be.

I don't have a solution off hand that I know of to help you out though as I don't know what the exact laws are for you, or anyone else, as collecting tax on digital items in and or out of state might be correct where you are too.  Hopefully, you can figure out a way to get it correct to what your accountant or lawyer advises, and if that means refunding the tax then that may be the solution you have right now.