Selling From Your Website And Taxes: What You Need To Know

Once you self-publish, you will more than likely want to sell from your website. Why?

1. You can control it

2. You get more profit

3. You can lessen your dependency on another retailer

4. You can control your customer list

There are a ton more reasons. But that isn't what this post is about. I want to share a few things with you that will hopefully keep you out of some very hot water.

The most important thing to know about selling from your own site is SALES TAXES AND VAT TAXES. Not knowing when to collect and remit can get you into some very hot water.

First, let’s start with digital products and the US.

When you sell from your website, you are considered (most likely) to be a remote seller. And those may have some extra rules per state, so please do your own research.

Biggest rule: DO NOT COLLECT TAX UNLESS YOU HAVE NEXUS IN THAT STATE.

What is Nexus? Nexus is when you reach a certain threshold, you must then register and collect sales tax. That threshold can be reached by: 1. Physical - The state you live (this gives you automatic Nexus) (This is also reached by having, say, a warehouse or a physical business in a state you don't live in.) 2. The number of transactions (most states are 200) or 3. The amount of money earned from sales in a state (most states are 100k. New York and California are 500K) {ALWAYS DO YOUR OWN RESEARCH. THESE NUMBERS CHANGE}

What does this mean?

When you reach NEXUS and ONLY WHEN YOU REACH NEXUS, then you must register in that state and collect US state sales tax for the state in question, and remit the sales tax. This is in a 12-month period. Most, if not all, the states have where you can register online. It is a very easy process.

Example: from the months of February 2022 to January 2023, you sold over 100K in sales to the state of New Jersey. At the moment your total sales reached 100k THEN, you would need to register with the state of NJ to collect and begin to remit taxes.

Or you IF YOU HAD OVER 200 TRANSACTIONS BUT DIDN’T MEET THE $$ AMOUNT, YOU STILL REGISTER AND COLLECT TAX. (Most states are 100K/200 transactions, NY and California are 500K)

For remote sellers, States base reaching Nexus on either *** meeting BOTH sales and number of transactions ** OR ** meeting one or the other.***

Tax regs change all the time, so do your own research.

There are also a few states that don’t have sales tax. Do RESEARCH, this list may have changed.

• Alaska, Delaware, Montana, New Hampshire, Oregon

• NOTE even though there may be no state sales tax, some cities within that state may require you to collect sales tax. RESEARCH. (They will have a threshold listed for those cities.)

IF YOU COLLECT US SALES TAX AND YOU ARE NOT REGISTERED WITH THE STATE IN WHICH YOU ARE COLLECTING SALES TAX FOR - YOU ARE BREAKING THE LAW.

Fines for this offense are egregiously high.

There are a lot of caveats in collecting tax. In my state, Oklahoma, digital products are not taxed. But physical products are. I have NEXUS only when selling physical products to someone in OKLAHOMA.

The state you live in will have different laws. Not all states tax digital products. Most do. You can check out this article by TaxJar. (https://www.taxjar.com/blog/sales-tax-digital-products). Always verify your state.

PHYSICAL PRODUCTS.

The same rules apply to NEXUS.

With the exception if you have a warehouse in a state full of products. In this instance, you need to do further research. This post is concerned with those who ship products individually to buyers.

Most remote sellers are destination based, meaning you collect tax based on the customer's address. Always check for yourself. There are some states that use the seller's address for collection.

States that generally tax digital products: (click on the state for more information)

• Alabama

• Arizona

• Arkansas

• Colorado

• Connecticut

• Florida

• Hawaii

• Idaho

• Indiana

• Iowa

• Kentucky (digital audio-visual works are excluded from the definition of “digital property”)

• Louisiana

• Maine

• Minnesota

• Mississippi

• Nebraska

• New Jersey

• New Mexico

• North Carolina

• Ohio

• Pennsylvania

• South Dakota

• Tennessee

• Texas

• Utah

• Vermont

• Washington

• Wisconsin

• Wyoming

• Washington, D.C.

States that generally exempt digital goods and services (click on the state for more information)

• California

• Florida (ebooks are exempt)

• Georgia

• Idaho

• Illinois

• Kansas

• Maryland

• Massachusetts

• Michigan

• Missouri

• Nevada

• New York

• North Dakota

• Oklahoma

• Rhode Island

• South Carolina

• Virginia

• West Virginia

YOU SHOULD RESEARCH EACH STATE TO VERIFY ANY CHANGES THAT HAVE RECENTLY BEEN MADE. Overall, most states are 100k/200 transactions and for most you will reach nexus when you hit either of these. Very few have a threshold where you have to meet both the dollar amount and the transactional amount.

Another important note when selling from your website…ALL STATES REQUIRE YOU TO HAVE A NOTICE TO THE CUSTOMER ON YOUR SITE THAT STATES, you are not required to collect and remit sales tax for their state, and they may be responsible for paying use tax at the end of the year. Some states even require you to send a year end notice that tells the customer they must check and see if they are required to pay use tax in their state for online purchases.

I cannot stress enough DO NOT COLLECT SALES TAX UNLESS YOU HAVE NEXUS.

NEXT: VAT AND WHAT IS IT?

For digital products:

VAT is the EU's version of sales tax, and it can be messy. This is based on the seller and all sellers must COLLECT AND PAY VAT TAX WHEN SELLING A DIGITAL PRODUCT. (For your knowledge: VAT is EU/GST is Australia/JCT is Japan.)

For VAT in the EU: if these criteria are met, you must collect TAX.

Digital products are taxable if they fit four criteria:

• They’re not a physical product.

• The merchant delivers the good online.

• The service involves minimal human interaction.

• The good is made with and by technology.

The VAT threshold is/was £75,000 in a 12-month period. This may have changed in April of 2022, so you need to research for yourself. If you reach this threshold, you must register, collect, and pay VAT tax.

Side note: IF you must register, the Ireland OSS is the easiest way to do it. This will allow you to register, collect, and pay the VAT tax in one place. It will then be dispersed to the country in question.

Physical Products and VAT

Selling and shipping physical products to the EU or anywhere else outside the US, will require a little more research. You must check the rules and regulations. Things change drastically when you ship into a VAT tax country. I don’t sell physical products outside the US. 1. It is so expensive to ship the products and 2. Shipping and taxes are so confusing when selling to an EU VAT country.

This post is just a small breakdown. I SUGGEST YOU ALWAYS TALK WITH A LOCAL ACCOUNTANT IN YOUR AREA.

Canadian Sales Tax. If you sell to Canadian residents, you mut collect and remit sales tax when you reach a threshold of 30k (Canadian dollars).

DO NOT LET THIS SCARE YOU AND KEEP YOU FROM SELLING FROM YOUR WEBSITE.

In its simplest terms:

1. Start with selling digital goods. Verify which states don’t require tax on digital goods and which do. This will help when knowing what states to keep track of for your NEXUS status.

2. Don’t collect sales tax in the US until you have NEXUS.

3. Once Nexus is achieved, register and remit tax.

4. Possibly consider using a store front like Payhip or Gumroad for your digital products because they take care of all VAT taxes for you.

5. If you sell into VAT countries, pay attention to the threshold and register when reached.

Once you get familiar with digital sales, then research physical sales. By that time, the rules will have changed, I’m sure. Since they change daily/weekly/monthly/yearly.

For me, I sell digital products, along with coffee mugs, fanny packs, and other items. Signed paperbacks will be up shortly. My physical products are only shipped to the US and I use Gumroad, along with Printful and Bookfunnel for fulfillment. (Bookfunnel for ebooks and audio books and Printful for other physical products. I will be adding audio books. Some rules vary for audio products, so just check those. I use Gumroad as my store front because they automatically take care of any VAT tax for me on digital products.)

I don't ship outside the US because I have not registered for VAT tax and I'm not ready to do that yet. If my sales in the US take off, and I am making money, then I will venture out to extend my sales reach. If my sales really take off, I will more than likely move my entire site to Shopify. But for me, I need to reach a certain sales threshold to warrant the expenditure for Shopify.

Selling from your site is worth the hassle. Just be smart about how you do it.

If you have questions, ask. I will help hunt down the answer for you.

You can check with a local accountant in your area as well. And I suggest doing this as a precaution.

Find more help at:

TaxJar and Avalar