Sales Tax Obligation and Registration for Authors, and How to Register for Sales Tax-Exempt Status with KDP and Ingram Spark
Prepared by DB&N Certified Public Accounts for Mission Point Press, Traverse City, Michigan
Authors typically are required to pay sales tax to their respective states when they sell their books to individuals. Those taxes are collected by the author upon sale. (Wholesale sales by authors to, say, bookstores typically do not require the collection of sales tax.)
Here are some guidelines on when and how you need to pay sales tax, and when you don’t.
OVERVIEW
• Sales tax is defined as a tax on the sale, transfer, or exchange of a taxable item or service.
• Sales taxes are considered “trust taxes” where the seller collects the tax from the customer and remits the collected tax to the appropriate taxing jurisdiction.
• The sales tax generally applies on the sale to the end user or ultimate consumer. The tax is generally added to the sales price and is charged to the purchaser.
• Sales tax in its truest definition applies only to intrastate sales where the seller and the customer are located in the same state. So, direct sales — say, at a book-signing event during which the author sells to his audience — can be considered intrastate sales.
• If you operate your own e-commerce store, then you generally look to whether the ship-from and ship-to location are in the same state. If so, those sales would be intrastate.
• Most states require a separate statement of the sales tax on the invoice so that the purchaser knows that the tax was paid. (This is true in Michigan; non-Michigan authors should check with your own state for guidance.)
• Most states require that the purchaser pay the tax as part of the purchase, and the seller to hold onto and then remit the tax to the state.
WHAT SALES TAX RATE DO I NEED TO CHARGE?
In-state:
If you are selling directly to readers in the state of Michigan, charge Michigan sales tax (6%). In the State of Michigan, sales tax needs to be charged on shipping and handling, as well as the product.
Authors outside of Michigan should check with their states regarding their rates.
Not Michigan:
If you are selling outside the state of Michigan:
• DO NOT charge Michigan sales tax on those sales that are out of state.
• Charge applicable state sales tax only if you have “nexus” in that state.
How do you know if you have nexus in a state?
• You maintain an office or location in that state.
• You have a representative or agent in that state.
• Your gross sales in that state exceed $100k.
• You had more than 200 transactions.
So, unless one of the above applies, book-signings in states in which the author does not have a presence do not require the collection of sales tax.
YOUR SALES TAX OBLIGATION
On all non-exempt purchases, you must collect sales tax from the purchaser. For all intrastate purchases in Michigan, the standard sales tax rate is 6%. For purchases made in other states, sales tax rates go to this page.
Each tax period you must:
• Report all registered taxes.
• Even if you owe nothing, report zero.
How often do you need to file and pay?
• Monthly, quarterly, or annually.
• Filing frequency will be determined by Michigan Treasury upon registering.
Due dates
• Monthly & quarterly: due 20th of the month following the tax period. Also file the annual return to reconcile the returns filed throughout the year.
• Annually: Annual return due by February 28th of the following year.
Making payments: Pay no later than the return due date to avoid penalties.
HOW TO REGISTER, FILE, AND PAY (STATE OF MICHIGAN)
You can register for a Michigan sales-tax license through this link.
Fill in the information in Form 518 on Pages 6 and 7, then print those two pages out and mail them to the address indicated. Questions? Call the Michigan Department of Treasury at 517-636-6925.
The state will send you a sales-tax license number, which you can then use on Form 3372. (See next page.)
For most Michigan authors, sales taxes collected in the prior year are payable annually by Feb. 28th of the following year. To report and pay sales tax, go to this page.
How to make your print-on-demand purchases tax-exempt
Prepared by Mission Point Press
Authors don’t need to pay sales tax on purchases of their books from their print-on-demand printers if they plan to re-sell those copies to a retailer or directly to a reader. However, both KDP and Ingram Spark will default to charging the author sales tax unless they are notified otherwise.
So, an author should register with their printers as a tax-exempt purchaser. The printer will then no longer charge the author sales tax.
Authors can then sell their books to retailers tax-free. (It’s the retailer’s responsibility to charge the end-customer sales tax.) Authors should charge individual readers sales tax when they personally sell their books to a reader … say, at a book-signing event organized by the author.
The steps involved in securing tax-exempt status:
Authors will first need to apply to Michigan (or to the state where the author resides) for a sales tax exemption. Here's the Michigan application, Form 3372.
Google “[ your state ] sales-tax exemption” to find the instructions for other states.
In Michigan, you can type directly into the on-line form. Below are screenshots of how you should fill out the form. Specifically:
Click on the Section 1-B box.
Then put in the name and address of either KDP or Ingram Spark. See the screenshots for those addresses below.
Click on the Section 2-2 box and write in the title of your book.
If you intend on selling directly to individuals, click on the Section 3-2 box and fill in your Sales Tax License number.
If you intend on selling directly to retailers such as bookstores, click on the Section 3-7 box (wholesale).
[ NOTE: MOST AUTHORS CLICK ON BOTH 3-2 AND 3-7 ]
Fill in your name and address (and be sure to use your business name if filing under a name other than your personal name).
In the window “Type of Business,” insert the number “11” for wholesale. (This relates to the instructions on the form, second page.)
Then print out and sign the document.
Michigan does NOT require you to file this document, which is your official exemption certificate. But you should keep it in your personal files, at the ready. Michigan will likely want to see this if you are challenged on your tax-exempt status (rare). On the next page are instructions on sending this certificate to KDP and Ingram Spark.
KDP Information
If your book is on KDP, you'll need to scan and send the copy of this exemption certificate (in states other than Michigan, it may just be an exemption number) to Amazon (KDP) through this page.
Ingram Spark Information
If your book is on Ingram Spark, you'll need to follow similar steps. Here are the Ingram Spark instructions:
• Log-in to your author account dashboard.
• On the far right-hand-top of your screen, there’s a small arrow next to your account name. Click it and select “Tax Information.”
• On the next screen, click the option, “Claim US Tax Exemptions.”
• Read the next screen, and answer the question, “Do you wish to claim an exemption from US State and Local Sales Tax? Click the “Yes” radial button.
• Click the “Continue” button and follow the instructions to complete the process.
When in doubt, contact your accountant or tax attorney. These instructions are provided only as a service by Mission Point Press. Mission Point Press claims no guarantee as to their accuracy, completeness, or timeliness. Tax laws are subject to change. Adherence to your state’s tax-exempt requirements is the responsibility of the author, not Mission Point Press.
To print any of the Author Resources, right click on the guide and select “print.” If you need additional help, ask your team leader to email the guide as an attachment.