Sales Tax Basics for Indie Authors
What Sales Are Subject to Sales Tax?
If you sell print books in person such as at a reading or book fair, or over the internet to buyers in your own state, then those sales are subject to sales tax in most states. The only states that don’t currently charge sales tax are Alaska, Delaware, Montana, New Hampshire and Oregon.
Twenty-five states also charge sales tax on digital downloads, so sales tax may apply if you are selling eBooks or other content via downloads if both you and the buyer are in a state that imposes sales tax on digital downloads.
If you are shipping orders to a buyer in another state, you are not required to pay sales tax to the buyer’s state unless you have a business presence (sometimes called a nexus) in that state. You will be considered to have a presence in the state if you have a home there or are selling books at venues in that state, such as a conference or book fair.
If you buy books without paying sales tax on your purchase, and instead give the books away to reviewers and friends or submit them to contests, then you are required to report those giveaways as if they were sales at the wholesale price to you. Some states call this a use tax. Use tax is equivalent to sales tax but applies to items you bought for resale but then used yourself.
You will report your sales (including sales to yourself) on sales-tax returns filed quarterly or annually depending on the state. In most states, you fill out the forms and pay the tax online.
How Much Is the Sales Tax?
If you are selling books from your home state to a buyer in your home state, then you pay sales tax at the rate applicable to the location of the sale, or if you are mailing the book, the location of the buyer. For example, if I were to sell a book at a fair in San Francisco, I would collect sales tax equal to 8.75% of the selling price. But if I ship the book to the buyer in Los Angeles, the sales tax would be 9%. If I ship the book out of state, there would be no sales tax unless I had a nexus in the buyer’s state.”