Last Updated: July 15, 2020
Originally Published: August 21, 2017
In a previous post, I discussed how indie authors can reduce their tax burden by reaching consignment deals with amenable local bookstores.
But what about situations where you do owe sales tax? If you’re an indie author, I hope this post will help you make sense of the relationship between your book sales and your sales tax burden.
Fact #1: Sales tax is taxed at the point of sale.
What an obvious tongue-twister of a statement!
This is the first thing you should know about sales tax, and explains why bookstores take on the sales tax burden through consignment agreements. They are the ones selling the reader your book at retail, while you sold your books to the store at wholesale.
However, if you sell a book directly to a consumer, you will owe sales tax on that purchase.
Fact #2: If you have a presence in a state, then you owe sales tax to that state.
This sentence carries a few lessons, so let’s break them down.
First, you have a presence in a state if you live and do business there. This means that if you have a shop in a state or your business is registered in a state, you will owe sales tax on any physical goods purchased there.
This is why Amazon charges tax for nearly all of its sales; its fulfillment centers ensure that it has a presence in every state.
For the average indie author, this means that you owe sales tax on any point-of-sale transaction made in your state. This could be anything from someone buying a book out of your trunk or swiping their credit card to your Square account at a local book fair.
Your website isn't exempt from this rule either. If you have a store on your author website, make sure that the checkout process includes a line of code that adds sales tax if a zip code from your state is used for the billing address. A website designer should be able to help you with this, and in some cases, it’s baked into the backend. (I can only vouch for SquareSpace on this; can any WordPress users chime in?)
Fact #3: You may owe sales tax to your county, too.
To learn how much state sales tax should be added to each purchase, simply search for your state’s sales tax (e.g., “New York sales tax”). Be sure you’re learning the answer from an official government website.
Don't forget, though, that your county may also charge a sales tax.
You can find this information by searching Google for your county’s combined sales tax rate (i.e., the total of state and county sales tax rates). This combined rate is the rate you should add to each unit of purchase. This should be obvious, but make sure the search result you get your answer from is a reputable source, preferably ending in the suffix “.gov.”
Fact #4: To pay sales tax, you must have a permit in your state.
Sales tax is owed monthly. To pay your sales taxes, be sure to register through your state’s Department of Revenue. (Search “STATE NAME + Department of Revenue.”)
If you’re a go-getter with a book launching a few months from now, ignore the impulse to register for a sales tax permit ASAP.
An accountant I spoke with explained that if you register for a sales tax permit but then don’t file sales taxes for a few months, your state's Department of Revenue may get suspicious or think you’re holding out on them.
Spare yourself this headache by registering for a sales tax permit two to three days ahead of your book launch.
Fact #5: An accountant can help you make heads or tails of the situation, and pay your monthly taxes on your behalf.
Speaking of CPAs, paying a professional a nominal amount to file monthly taxes on your behalf can be well worth the peace of mind you gain as a result. To find the right accountant for you, talk to other indie authors and small business owners in your area.
Are you an indie author who pays sales tax? I'd love to hear from you! Share your thoughts in the comments section below.
Also, if this article helped you and you think it’ll help your friends, share it via email and social media. You can tag me on Twitter or Instagram as @JessicaNHatch.
Jessica Hatch is not a Registered Investment Advisor, Broker/Dealer, Financial Analyst, Financial Bank, Securities Broker or Financial Planner. The information in this blog post is provided for informational purposes only. It is not intended to be and does not constitute financial advice, is general in nature and not specific to you. Ms. Hatch is not responsible for any investment decisions made by you. You are responsible for your own investment research and investment decisions.