Virtual products not being taxed

Question

I can't seem to find anywhere that says Virtual products in Magento cannot be taxed.

There is a weird occurence that I have discovered.

1. If I have ONLY virtual items in my shopping cart with a Product Tax Class assigned to them, no tax is displayed or calculated after entering a taxable zip code.

2. If I have at least ONE non-virtual item (simple for example), then tax is calculated for ALL of the virtual items, and the simple.

Is this a bug, or am I missing something?

Answer 1

Your tax settings may be configured to tax on shipping destination. From Magento's point of view, no shipment might mean no applied tax.

Changing your tax configuration to tax on the billing address may correct your problem.

1. In the Magento admin, go to System > Configuration > Tax.
2. Check if Tax Calculation Based On is set to Shipping Address

If so, tax will not be calculated on orders that do not require a shipping address.