Author Tax Information and Resources

Note: I am not a tax professional. This post is only meant to provide a central place to access resources on tax information for US-based authors selling worldwide via your own store (ie, not on a platform).

Very quickly after beginning to set up my shop, I had to delve into the world of tax laws. And I had a lot of questions! When do I need to register to pay taxes? What products do I tax?

There’s already great information out there on a lot of this, but I struggled to find one location that summarizes the information I needed into one place. So this is my attempt to do so.

I am an author based in Arizona, USA. Below, you’ll find information on taxes for US-based authors.

Economic Nexus

First, I want to describe a term that you’ll see if you run a search on taxes in direct sales: economic nexus. I’m not going to DEFINE it because I don’t really understand the actual definition. But I’ll do my best to describe its implications.

The economic nexus is how you decide whether you must pay sales tax in a given place. If you have or reach an economic nexus in a given place, you must register and pay taxes there.

The most common economic nexus is your physical location. Most states require you to pay sales tax if you sell goods to a person who lives in the same state as you.

But what about other states? Most states have a threshold, and once you exceed the threshold, you must pay sales tax on sales to people from that state who purchase from you.

That’s the nuts and bolts of it. I’ll go into more details below, but the main point is that if you meet the criteria to have or reach an economic nexus someplace, you must register and pay taxes.

Now that’s out of the way, let’s talk about the specifics.

US-based author selling to US-based readers

As mentioned above, if you reach economic nexus in a particular state, you must register and pay taxes there. You’ll need to keep track of your sales: both the number of transactions in each state AND the total amount sold in each state.

Remember, if you live in a state with sales tax, you automatically have economic nexus in that state. Therefore, you must register and pay sales tax in the state where you have a physical presence (eg, where you live).

The economic nexus for each state is different, but they come in a few flavors:

  • No economic nexus (no sales tax)
  • $ amount threshold (eg, $100,000 per year)
  • Either/or $ amount or transaction count (eg, $100,000 OR 200 transactions per year)
  • $ amount and transaction count (eg, $100,000 AND 200 transactions per year)

Keep in mind that this isn’t your total sales, but only the sales from that state. So if you’ve made $100,000 in sales, but only $50,000 of that is from a state with an economic nexus of $100,000, then you haven’t reached the threshold yet.

By this point, you’re probably burning to know what the economic nexus is for each state.

Check out this resource from Avalara, which lists each state’s economic nexus as well as has a handy graphic!

Quick note that as of 6-Feb-2024, Florida requires charging sales tax on shipping costs as well as goods. If you’re in Florida or have reached economic nexus there, you’ll want to look into this to ensure you’re calculating sales tax correctly.

US-based author selling to European Union

The EU has its own fun tax regulations. Here are a few to consider, copied from this article.

Value-Added Tax (VAT): Like EU-based Amazon sellers, US e-commerce sellers selling in the EU may also be required to register for VAT in the countries where they store inventory or make sales. This requires obtaining a VAT registration number, collecting and remitting VAT on sales, and complying with local VAT regulations.

Customs Duties and Taxes: If you ship goods to customers in the EU from the US, you may be subject to customs duties and taxes, which can vary depending on the country of destination and the type of product.

Income Tax: US e-commerce sellers selling in the EU may also be subject to income tax on their profits, both in the US and in the EU. This requires complying with both US and EU tax laws and filing tax returns in both jurisdictions.

For the purposes of this article, I’m only going to cover VAT.

Each country has its own annual threshold, similar to each state in the US. Avalara comes through again with a handy chart of the VAT registration thresholds for distance selling. Most countries have a threshold of 35,000 euros.

The tax rates are also different per country. Some countries charge specific VAT rates for digital products, so ensure you include the type of good (physical, ebook, audiobook) in your search when looking up the current rates. Avalara is a great resource for this.

US-based author selling to United Kingdom

The VAT registration threshold for the UK can be found here and is currently 85,000 pounds.

At the time of writing, physical books, ebooks, and audiobooks have a zero-rate VAT.

US-based author selling to Canada

The tax registration threshold for Canada can be found here and is currently 30,000 CAD per calendar quarter.

Each Canadian province has its own tax rate, so you’ll need to do a search to see the most up to date values. You can use this page by Lovat as a guide.

US-based author selling to Australia

The tax registration threshold for Australia can be found here and is currently 75,000 Australian dollars within a 12-month period. More information can be found here and here.

US-based author selling to New Zealand

The tax registration threshold for New Zealand can be found here and is currently 60,000 NZD within a 12-month period. More information is available in this guide from Avalara and this guide from Quaderno.

Wrap Up

There’s a lot to consider when starting an online business, and taxes are just one of them. Hopefully, this article gave you a place to start and, if you’re just starting out, eases the worries of having to file for taxes for a while. Best of luck!

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