When you sell physical merchandise, such as your paperback or hardcover books, you are supposed to collect and report sales tax. In order to do this properly, you should apply for a resale license—also known as a seller’s permit, depending on where you live.
Don’t worry—it’s usually not as complicated as it sounds.
A resale license/seller’s permit gives the holder the ability to purchase merchandise at wholesale (without paying sales tax), but then you must collect sales tax when the item is later sold in the state where you live or have offices. You must then send any sales taxes collected to your local authorities on a monthly, quarterly or yearly basis, depending on their guidelines.
How to Apply for a Resale License
To apply, you will need to locate your local county sales tax office. A simple Google search for “resale license [county name]” should get you to the application process or a phone number to call to ask questions. A resale license should cost very little to obtain (usually under $100) and will ensure you’re operating your book sales legally.
Some states and counties also require that you register a DBA name for your business. This is a “Doing Business As” document that allows you to create a business identity separate from your personal identity, which is important for banking purposes. You’ll need that official DBA license to apply for a business checking account, which is recommended if you want to treat your book business seriously. At tax time, the IRS wants to see that you’ve kept your personal and business banking separated.
Again, check with your local county offices to find out the requirements, but filing a DBA is typically just a matter of filling out the application, paying a fee of under $200, and then publishing the name in a local newspaper to make it official. You will need to renew it periodically (usually annually).
Benefits of Setting Up Your Business
If you aren’t sure whether you want to treat your book like a business, consider some of the benefits. As a business owner, you can take advantage of writing off expenses related to running your business, including all production costs for your book. This can also include marketing services, education and memberships, travel expenses, postage and shipping, office supplies, computers, printers and any other business-related expenses. Sometimes you can even get a write-off for your home office, which includes a percentage of your annual utility bills. Be sure to talk with an experienced tax professional where you live for advice on how to navigate your tax filing.
Check for Local Regulations
Guidelines and tax rates are different for every state and county so you will need to check with local offices to understand the exact requirements where you live. Several states are also exempt from sales tax entirely, including Alaska, Delaware, Montana, New Hampshire and Oregon.
In most cases, you should only need to collect and report sales tax for physical products sold within your state. Products shipped to buyers outside of the state aren’t subject to sales tax—yet. This is the subject of great debate with brick and mortar retailers who argue that sales tax exemption gives online retailers an advantage. But online retailers do have to collect sales tax for any state where they have offices. For a company like Amazon, that includes upwards of 20 states.
By the way, if you sell the ebook version of your book on your website, you won’t be required to collect sales tax. Non-physical products like ebooks, music files and other digital downloads are currently exempt from sales tax collection.
These guidelines are constantly changing so be sure to check with your local county offices for the specific guidelines that apply to you.
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