I am not a CPA and this is not tax advice. Please consult with your CPA or a tax professional for advice on your specific needs. 

Q –

Angela,

In talking to many independent authors, there is a growing awareness of the penalties of not collecting Sales Tax. In several states, if you exceed the tax threshold, you must register and file financial documents with the tax authorities of those states.

It is extremely difficult to stop filing reports later, even if sales slow down or stop completely. If you do not collect and file, there are very significant tax penalties and fines that far exceed any revenue the book sales may have produced.

Who is responsible for reporting and paying those taxes to avoid the penalties and fines?

– M

A –

The company (or person) selling the product is responsible for collecting and remitting sales tax…in some instances. Things have changed quite a bit in the sales tax realm. After many years of the Internet enabling tax-free purchases, states started getting antsy. Then, federal law was passed permitting states to jump their borders when collecting sales tax.

“Economic Nexus legislation generally requires an out-of-state retailer to collect and remit sales tax once the retailer meets a set level of sales transactions or gross receipts activity (a threshold) within the state. No physical presence is required.” – SalesTaxInstitute.com

In other words, many states now require persons and companies located out of state to collect and remit sales tax if the product is shipped to someone in that taxing state. However, most of those states have sales thresholds that must first be met before you’re required to start collecting and remitting sales tax for that state. For example, if you’re an independent author shipping a book to California, you’d need to have generated $500K in sales to CA residents before you’d hit the threshold. But, other states have lower thresholds. Some have thresholds based on the number of transactions. Other states use a combination of sales and transaction thresholds. I.E. $100K in sales or 200 transactions.

You ARE required to collect and remit sales tax in your own state for books sold in and shipped to addresses in your state, and there are no thresholds for those.

If you don’t want to deal with all of that, refer your buyers to your publisher’s website, or Amazon, or elsewhere.

If someone buys a taxable product, and is not charged sales tax on that item, they are supposed to report and pay “use tax” on that purchase to their own state. However, most people do not do that. That’s why so many states have enacted these new sales tax laws.

If you want to see a chart detailing different states’ sales tax requirements, and their thresholds, the best resource for that is RIGHT HERE.

If you have questions about collecting and remitting sales tax in your state, go to the department of revenue website for your state, and then find the sales tax link. There’s a handy list of those websites RIGHT HERE.

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