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I understand that if I sell things online, I need to calculate Taxes based on customer location. Can I use IP to locate customer or should I ask them explicitly?

If it is fine to use IP to identify customer's Country, is it fine to locate customer State/Province.

I need it because Canada has different taxes in different Provinces.

Yevgeniy Afanasyev
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    It is not a good idea to make assumptions based on IP address. The address not necessarily telling the citizenship of the customer (he may be ordering while being away or using a VPN connection). If you want to do this automatically (which you probably should not) the delivery address would be a better indicator. – Martin Maat Jul 26 '19 at 05:05
  • I don't have a delivery address, I sell software and subscriptions. – Yevgeniy Afanasyev Jul 26 '19 at 05:15
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    if you buy something while being away, you pay GST where the sale has been made. If you go to Australia and buy a T-SHIRT, you pay GST to Australia, no matter what was your citizenship. – Yevgeniy Afanasyev Jul 26 '19 at 05:23
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    use the billing address – Ewan Jul 26 '19 at 07:39
  • @Yevgeniy If you buy the T-shirt in Australia and have it delivered to your doorstep in your home country, tax rules for your home country would ultimately apply. If you take them home yourself you would pay tax at the border. Either way, your location at the moment of the sale is irrelevant. I would say it is better for you not to make assumptions and keep the customer responsible for providing truthful information. – Martin Maat Jul 26 '19 at 08:43
  • @YevgeniyAfanasyev do you get a billing address? – ivanivan Jul 26 '19 at 15:08

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No, you cannot use the IP address to reliably find the location of your customer.

If the customer is using a corporate network, then the geolocation of the IP address will identify the location where the corporate network connects to the internet. This location can easily be in a different country than where the customer is physically located in the case of a multi-national company.

When the customer has a dynamically-assigned IP address, which is the standard for mobile devices and home connections, then the geolocation information typically refers to either the ISP/mobile provider's headquarters or where their network connects to the internet.

When the customer is using a VPN connection, then that has the same effect as a corporate network. Also, using a VPN the customer could be standing next to you, while the geolocation tells you he is overseas in a location for which you don't need to charge taxes. As that kind of cheating the government would be too easy, I doubt that the tax office is going to accept geolocation based evidence that you paid the correct amount of taxes.

Bart van Ingen Schenau
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  • Do you recon the direct question to the customer will give me more reliable answer than IP? – Yevgeniy Afanasyev Jul 26 '19 at 08:24
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    @YevgeniyAfanasyev: Yes. It may not deter the real cheats, but it will prevent accidental entry of wrong data. According to IP geolocation, my laptop and phone are about 200km apart, in different provinces. In reality they are sitting next to each other. And both IP locations were off by about 150km and also indicated the wrong province. – Bart van Ingen Schenau Jul 26 '19 at 08:38
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    @YevgeniyAfanasyev And also, whether or not the customer's answer is actually reliable, it's the best you can do. If a customer lies to you, you've done your due diligence to apply tax correctly. You should be using billing address in any case, though (since that should be required for the card-not-present transaction) – Delioth Jul 26 '19 at 18:26