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1,591 Views 18 Replies Last post: Jul 17, 2017 11:13 PM by downloadminecraft RSS
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Level 1 183 posts since
Jul 22, 2016
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Jul 10, 2017 4:05 PM

Sales Tax Surprise

Hello!

 

Again, I'm slow on the draw. I donated some books to my mother's home town library and while I noticed the cost was more than the books I ordered for myself, my assumption was shipping. I just now noticed, that was not it ... there was a tax taken! This so did not occur to me. For one, I'm not selling them, I'm donating, and for two... I live in Oregon. We don't have a sales tax. (Delaware, New Hampshire and Montana also do not have sales tax.) The tax was still cheaper than mailing it to me and me mailing it to them, it just surprised the heck out of me.

 

A few questions... does this mean I now have to file a tax return in every state I sell a book?

My assumption would be, no for this instance as I was not the one to collect the tax. However, if I am in Oregon, and I personally sell a book to someone in Florida, do I collect tax? If so, who do I give it to? I all seems so confusing.

 

Is there away around this tax when I'm not selling but donating? Other than reshipping?

 

And since we are on the topic, I assume I will get some kind of lovely little W-4 or some such thing at tax time from Createspace, for books sold through them. Do they also summit the number of books I order? While I plan to sell, sell, sell! I also have plans for promotional giveaways.

 

Thanks!

Level 2 295 posts since
Feb 11, 2016
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1. Jul 10, 2017 7:07 PM in response to: beetles_bub
Re: Sales Tax Surprise

Alaska also does not have sales tax.

 

In your situation, I think you are stating that you are in Oregon but you requested that CreateSpace dropship the order to a library located in Florida.  In that situation, CreateSpace is required to charge Florida sales tax unless you provided to CreateSpace the appropriate exemption form certifying that you were exempt from Florida sales tax for this type of transaction.

 

In general, sales tax in the USA is based on the "ship-to" address not the "bill-to" address.  Some exceptions may apply in certain situations but not likely in your situation.

 

Sales tax law is complicated in the USA and varies for each state and each of the roughly 10,000 sales tax jurisdictions in the USA.

Level 5 5,159 posts since
Jan 17, 2010
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2. Jul 10, 2017 11:39 PM in response to: beetles_bub
Re: Sales Tax Surprise

beetles_bub wrote:

 

A few questions... does this mean I now have to file a tax return in every state I sell a book?

My assumption would be, no for this instance as I was not the one to collect the tax.

Nope. This is sales tax, not income tax. It's up to the collector (Amazon) to report and remit sales tax to the appropriate tax authority.

I assume I will get some kind of lovely little W-4 or some such thing at tax time from Createspace, for books sold through them.

Nope again. See above.

 

Sarah
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http://sleepingcatbooks.com
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Level 2 134 posts since
Jun 20, 2017
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3. Jul 11, 2017 7:16 AM in response to: beetles_bub
Re: Sales Tax Surprise
However, if I am in Oregon, and I personally sell a book to someone in Florida, do I collect tax

 

In theory, yes, we're supposed to do that. In practice I doubt that any of us (who don't actually run a bookstore-type business) would dream of doing it. I have been selling print editions of my books for about twenty-five years through my websites, and I have never done so.

 

Good luck! -- NJ

 

Notjohn's Guide to E-Book & Print Formatting: http://viewbook.at/notjohn

 

The blog: http://notjohnkdp.blogspot.com

Level 5 12,729 posts since
Aug 22, 2008
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4. Jul 11, 2017 7:56 AM in response to: Notjohn
Re: Sales Tax Surprise

Notjohn wrote:

However, if I am in Oregon, and I personally sell a book to someone in Florida, do I collect tax

In theory, yes, we're supposed to do that.

No, sales tax is a tax imposed on the buyer, not the seller. When the buyer and seller are in the same state, the seller is obliged by that state to collect the applicable sales tax from the buyer and remit it to the state's taxing authority. When they are in a different state, the seller has no such obligation (except in a few unusual locations like CT and NJ suburbs of NYC).

 

When the buyer is in a different state than the seller, it is the buyer's responsibility to pay sales tax to his/her state for purchases on which no tax was collected by the seller (called "use tax" in most states). Buyers almost never do that (many don't even know they're supposed to) unless it is an item that has to be registered with the state such as a motor vehicle.

Level 1 252 posts since
Oct 6, 2014
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5. Jul 14, 2017 11:58 AM in response to: BooksAndMore
Re: Sales Tax Surprise

BooksAndMore wrote:

 

. . . In your situation, I think you are stating that you are in Oregon but you requested that CreateSpace dropship the order to a library located in Florida.  In that situation, CreateSpace is required to charge Florida sales tax unless you provided to CreateSpace the appropriate exemption form certifying that you were exempt from Florida sales tax for this type of transaction.

 

In general, sales tax in the USA is based on the "ship-to" address not the "bill-to" address.  Some exceptions may apply in certain situations but not likely in your situation.

 

Sales tax law is complicated in the USA and varies for each state and each of the roughly 10,000 sales tax jurisdictions in the USA.

I don't agree with any of this.

 

Sales tax is imposed on the retailer on an in-state sale. Whether the state has jurisdiction to impose a sales tax upon the retailer depends on whether nexus exists. Nexus is defined in different ways in different states, but without a business presence in the state, there's no nexus that would allow the state to impose sales tax on the retailer. Examples of nexus include stores, sales offices, and warehouses and other points of distribution. Whether nexus exists isn't dependent on whether the product is distributed from the in state location, just that it exists.

 

A manufacturing location does not create nexus because the United States has no concept of VAT.

 

Must Florida sales tax be collected? I would ask the question, Who is the retailer? If it's Amazon, well, they have warehouses in almost every state these days, so they'd collect sales tax. Is it CreateSpace? I don't see how there's nexus unless CreateSpace has a distribution point in Florida that it ships from, not necessarily for the book in question. If the publisher acted as its own retailer, and shipped the book out of its own inventory, that would be an interstate sale without nexus, no Florida sales tax would be imposed.

 

No, the legal obligation of the retailer to collect and remit sales tax is not dependent on the ship-to address but whether an in-state sale has occurred based on whether nexus exists. The sales tax rate may depend on the ship-to address or the rate at location of the point of nexus. In my state, it's the latter, with a number of exceptions.

Level 1 252 posts since
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6. Jul 14, 2017 12:03 PM in response to: Lighthouse24
Re: Sales Tax Surprise

Lighthouse24 wrote:

 

Notjohn wrote:

However, if I am in Oregon, and I personally sell a book to someone in Florida, do I collect tax

In theory, yes, we're supposed to do that.

No, sales tax is a tax imposed on the buyer, not the seller. When the buyer and seller are in the same state, the seller is obliged by that state to collect the applicable sales tax from the buyer and remit it to the state's taxing authority. When they are in a different state, the seller has no such obligation (except in a few unusual locations like CT and NJ suburbs of NYC).

 

When the buyer is in a different state than the seller, it is the buyer's responsibility to pay sales tax to his/her state for purchases on which no tax was collected by the seller (called "use tax" in most states). Buyers almost never do that (many don't even know they're supposed to) unless it is an item that has to be registered with the state such as a motor vehicle.

Use tax is imposed on the buyer. Sales tax is imposed on the seller. Many states impose use tax on the buyer of a product in an interstate sale for which no sales tax was collected. If for some reason sales tax was collected due to nexus, then use tax isn't imposed.

Level 5 12,729 posts since
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7. Jul 14, 2017 2:16 PM in response to: a-h-k
Re: Sales Tax Surprise

I disagree. Sales tax and use tax are both consumption taxes, imposed on the buyer. One (use tax) is directly imposed (paid by the buyer directly to the taxing authority), while the other (sales tax) is indirectly imposed (paid by the buyer to the seller, who then remits it to the taxing authority).

 

By law in most states, sales tax must be shown as a separate line item on a sales receipt (except for certain things like admission to movies and sporting events). This is relevant because all state sales taxes paid by buyers are deductible on their federal income taxes if they itemize (underscoring the fact that even the IRS considers state sales tax to be a tax on the buyer, not the seller).

 

For the seller, whether it's Amazon or a self-publishing author, the sales taxes collected from buyers are not income nor are they considered part of gross revenue. Any sales tax that has been collected, but not yet remitted to the state, is carried as a liability.

Level 1 252 posts since
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Currently Being Moderated
8. Jul 15, 2017 10:58 AM in response to: Lighthouse24
Re: Sales Tax Surprise

Sales and use taxes are types of excise taxes. From an economic standpoint, an excise tax is imposed on both buyer and seller, not one or the other. From the seller's standpoint, it increases expenses and decreases sales. From the buyer's standpoint, it costs him more to get less value.

 

My comment was specific to which party remits the tax directly to the taxing authority. As a use tax is to be remitted by the buyer, for that reason, it was necessary to note its distinction from a sales tax, especially as as earlier in the discussion, another person expressed the opinion that the burden is on the seller to collect sales tax in an interstate sale, which is never true. The sale must be in state according to the state's rules of nexus in order for the burden to be imposed on the seller.

 

I certainly agree with your statement that a tax collected but not yet remitted is carried as a liability on the books.

Level 5 12,729 posts since
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9. Jul 15, 2017 3:23 PM in response to: a-h-k
Re: Sales Tax Surprise

a-h-k wrote:

Sales and use taxes are types of excise taxes.

Again, I disagree. Excise taxes are levied on the producers or merchants of specific products. Unlike sales taxes, excises taxes are not shown on sales receipts, and whatever excise tax might be built in to a product's cost (gasoline or alcohol, for example) cannot be deducted from the buyer's/consumer's income tax.

 

a-h-k wrote:

...another person expressed the opinion that the burden is on the seller to collect sales tax in an interstate sale, which is never true.

Except when it is, as I noted in my original post (The NY/NJ Cooperative Sales Tax Program is an example). I didn't interpret any of the other responses in this thread as saying that a seller has to collect sales tax in an interstate sale.

Level 1 252 posts since
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10. Jul 15, 2017 11:33 PM in response to: Lighthouse24
Re: Sales Tax Surprise

Lighthouse24 wrote:

 

a-h-k wrote:

Sales and use taxes are types of excise taxes.

Again, I disagree. Excise taxes are levied on the producers or merchants of specific products. Unlike sales taxes, excises taxes are not shown on sales receipts, and whatever excise tax might be built in to a product's cost (gasoline or alcohol, for example) cannot be deducted from the buyer's/consumer's income tax.

 

a-h-k wrote:

...another person expressed the opinion that the burden is on the seller to collect sales tax in an interstate sale, which is never true.

Except when it is, as I noted in my original post (The NY/NJ Cooperative Sales Tax Program is an example). I didn't interpret any of the other responses in this thread as saying that a seller has to collect sales tax in an interstate sale.

I withdraw the comment that sales taxes are a type of excise tax.

 

http://www.state.nj.us/treasury/taxation/pdf/pubs/sales/anj14.pdf

Looking it up, the NY/NJ program was voluntary and therefore was never an unconstitutional burden on interstate commerce. My point here stands. Also, the program ended a number of years ago.

 

The example used in the publication shows the difference in sales tax laws from state to state. It uses an example of a New Jersey resident who purchases a tv in New York. Apparently, New York sales tax doesn't apply to the purchase, but the buyer is obliged to pay New Jersey use tax. If the retailer had voluntarily participated in the program, the buyer would have remitted use tax to the retailer and not his home state.

 

In my state, state sales tax would have applied to that transaction, despite the merchandise being put into use in a different state. The sales tax applies based on the location of the sales transaction and not the location at which the merchandise is put into use. A chain department store was taken to court by the state many years ago for charging sales tax on bulky items that were delivered as if the purchaser had made the purchase at a store in an area with a lower sales tax rate (if the purchaser and the store were in the same county). If the purchase was made at a store in an area with a higher sales tax than where the purchaser lived, that was the sales tax rate to collect.

Level 5 12,729 posts since
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11. Jul 16, 2017 7:59 AM in response to: a-h-k
Re: Sales Tax Surprise

a-h-k wrote:

In my state... sales tax applies based on the location of the sales transaction and not the location at which the merchandise is put into use.

So according to your state, in what location does an internet/online sales transaction occur?

Level 1 252 posts since
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12. Jul 16, 2017 11:23 AM in response to: Lighthouse24
Re: Sales Tax Surprise

In the hypothetical in the New Jersey tax publication, the New Jersey resident went to a New York store (which had just the single location) to make the purchase.The merchandise was put into service in New Jersey. New York sales tax didn't apply, but New Jersey use tax did.

 

Changing the hypothetical to a retailer located in my state, if the sale to the out-of-state purchaser took place in the store, my state's sales tax applies.  If a retailer in my state made a sale to a purchaser in another state via an on-line order or mail order, state sales tax would not be collected.

 

If the purchaser is in my state and nexus applies to the retailer, then state sales tax is collected at the rate applicable to the retailer's fulfillment location even if the sales location isn't in my state. For instance, Amazon recently opened a warehouse to fulfill some orders in my state. In fulfilling any order in my state, they collect sales tax at the rate of that warehouse's location, even if the specific order wasn't fulfilled from that warehouse.

 

My state's sales tax differs by location and, in a few cases, by what's being purchased. On top of that, certain home rule municipalities and home rule counties are allowed to add an additional sales tax which the retailer remits to the state if the tax base is the same as the state uses. This leads to lots of game playing. Now, an airport is in a specific location and airplanes can't exactly taxi down a highway looking for cheaper fuel. Sales offices for fuel were set up in certain parts of the state with a favorable sales tax rate versus the rate charged in the municipality in which the airport was located. These offices tended to be unstaffed most of the time, making it difficult for the fuel seller to claim that any sales took place in that office. The state and various units of government that weren't receiving taxes at the applicable rate sued. They eventually won the case but because of a technicality in administrative law, it wasn't retroactive to a period before the state last amended the regulation.

Level 5 12,729 posts since
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13. Jul 16, 2017 12:55 PM in response to: a-h-k
Re: Sales Tax Surprise

a-h-k wrote:

For instance, Amazon recently opened a warehouse to fulfill some orders in my state. In fulfilling any order in my state, they collect sales tax at the rate of that warehouse's location, even if the specific order wasn't fulfilled from that warehouse.

I believe that is an exception to the norm, and perhaps explains your perspective on this issue. Both Amazon and CreateSpace say that the sales tax rate applied will generally be the combined state and local rate for the address where your order is shipped [emphasis added]. That's what the initial replies in this thread seem to indicate, and that has been my experience as a business owner operating in multiple states. Of course, the word "generally" in their stated policies suggests that there are exceptions (e.g., your state).


Level 1 252 posts since
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Currently Being Moderated
14. Jul 16, 2017 10:45 PM in response to: Lighthouse24
Re: Sales Tax Surprise

I know what CreateSpace says about it. From the perspective of a taxing authority, CreateSpace and Amazon are different companies. Amazon has warehouses everywhere, but CreateSpace doesn't. Orders are fulfilled from just a handful of locations, so not every order will count as an in-state sale.

 

I will note that Amazon simply stopped fighting state pressure to collect use tax in 2012. CreateSpace is just following orders from above.

 

You can either think of it as voluntary on Amazon's part, in which case there's no burden on interstate commerce, or mandatory due to nexus.

 

Some time before 2012, Amazon had shut down its affiliate program due to New York state's "click through" law, which everybody knew was aimed at Amazon, because having an in-state party earn a small commission was good enough for the state of New York to assert nexus based on the location of the affiliate. https://blog.taxjar.com/click-through-nexus/

 

On the issue of which sales tax rate applies on an in state sale, some states are "origin based" (sales tax applicable to the location of the sale) while others are "destination based" (sales tax applicable at the location at which the tangible good is put into service). In some states, the rules are different for an out-of-state business with in-state nexus versus an in-state business. Isn't that lovely? https://blog.taxjar.com/charging-sales-tax-rates/

 

No, a state's sales tax law is not "an exception to the norm" just because your state's sales tax laws are in a different category than my state's.

 

Even more fun are retailers who use Fulfillment By Amazon, because Amazon doesn't tell the retailer which location the retailer's goods are housed at nor which warehouse the order is fulfilled from. After all, Amazon has warehouses that are used for the transit of goods among its warehouse network but not for fulfillment. How can the retailer possibly know if he has nexus applicable to a specific sale?

 

Lastly, no, it's not "my perspective on this issue". The concept of nexus is one of long standing in Negative Commerce Clause case law. The perspective that counts is that of Justice Stevens, who wrote the opinion in the case that still controls, Quill v North Dakota (1992), which reaffirmed Bellas Hess v Illinois (1967).

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