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Shane Lochlann Black said:
Congress will hopefully recognize this is going to lead to chaos and re-establish the current status quo through legislation.
Can they get to that right after they do something about a major credit bureau allowing my SSN, which I can't change, to get in the hands of hackers along with all other info necessary for an identity thief to impersonate me? (I guess since it's just me and 250M other Americans it can go on the back burner...)
 

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Since I haven't set up my e-commerce yet, I'll be looking for some third-party provider to do it for me if and when I do. Wasn't Instafreebie doing some kind of e-commerce thingie recently? Maybe they'll add automatic sales tax collection and remission functionality, or something.
 

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In another thread about selling direct, I'm pretty sure someone mentioned a processor that dealt with all of this for you. That's obviously going to have an associated cost compared to direct payments, but the sky isn't falling.
 

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Anyone thinking that dealing with the different states directly won't be a pain in the butt has never had to deal with the State of New Jersey.  ;)

The obvious solution is to let third-party payment systems, like Paypal, collect the taxes and remit them. It would cost another bit per transaction, but would easily be worth it.
 

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I did a little more checking. The South Dakota law says you have to collect the tax if you do more than $100,000 in business in South Dakota, or have more than 200 transactions. Seems the national news reporters missed that last little bit. So if you're selling direct, only sell 199 books per year in SD. That shouldn't be too hard.

Things get dicier when you talk about digital products. They are not defined as "tangible personal property" in most jurisdictions. Also, for sales of something like stock photos, the seller can claim they are a component in a final product and therefore not subject to tax at the wholesale level. They would have to get a Tax Exempt Certificate from all their buyers, however.

In general, a major PITA for anyone trying to sell on line. Luckily, most of us will never be selling books directly, so we can let Zon and Apple, etc. worry about it.
 

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David VanDyke said:
Since I haven't set up my e-commerce yet, I'll be looking for some third-party provider to do it for me if and when I do. Wasn't Instafreebie doing some kind of e-commerce thingie recently? Maybe they'll add automatic sales tax collection and remission functionality, or something.
BookFunnel integrated with PayHip to deliver books sold through PayHip. PayHip changed its business/distributor structure a little so that they can act to collect and remit VAT on behalf of people who sell through them (they are officially the seller, not just a storefront for the authors/content producers who are the sellers). So far, they've been saying that since they aren't a US company (based in the UK; no nexus in the US), books sold through them aren't subject to sales tax in the US. Obviously, that is probably going to change now; not having a nexus in the US won't keep them from having to collect and remit sales taxes in the US.
 

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Obviously, that is probably going to change now; not having a nexus in the US won't keep them from having to collect and remit sales taxes in the US.
At some point in the relatively near future, an attorney with appropriate experience is going to have to issue an opinion/book/instructional video/whatever on the subject of jurisdiction, because it is confusing people far too much.

Individual state governments do not have jurisdiction over a business based in the UK for the same reason individual EU nations (or the EU itself) has no jurisdiction over US businesses. Their laws do not apply to citizens of the United States. Our laws do not apply to subjects of the British Crown. To be fair, citizens of Florida aren't even subject to the laws of Connecticut unless they are actually in that state.

The point already made about being subject to taxes in foreign jurisdictions applies here. This simply isn't workable. Freed from their obligation to play fair, states could (and probably will) impose gargantuan taxes on foreign businesses in order to defend their own, and those foreign businesses will have no choice but to comply and will further be forever barred from challenging their unfair treatment.

Edited for political content. Drop me a PM if you have any questions. - Becca
 

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Time out.

Here's the actual opinion, not the press coverage (never trust the press on issues about law ... or science ... or facts ... or ...): https://www.supremecourt.gov/opinions/17pdf/17-494_j4el.pdf

So, they overturned Quill, which was the physical nexus test. Yes, it is potentially an issue. The case was remanded and South Dakota's law will likely stand.

What does this mean?

Well, SD wants you to collect and remit sales tax to them if you sell more than $100k or 200 transactions per year in SD. So, less than 200 SD buyers means you don't have to.

Other states will implement their own laws/limits. Some may be higher, some lower, but SCOTUS signaled clearly that a "all sellers" thing won't fly.

So they've said that $100k/200 transactions fulfills the nexus test, but, effectively, that $1/1-transaction will be frowned upon. There were several other limiting signals in the opinion as well, but they didn't come out and set the limits, because that's not their job.
 

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Discussion Starter #29
Speaker-To-Animals said:
In another thread about selling direct, I'm pretty sure someone mentioned a processor that dealt with all of this for you. That's obviously going to have an associated cost compared to direct payments, but the sky isn't falling.
Yes, that person was me:

ibizwiz said:
I didn't want to comment on sales taxes here, since it's a large subject. But several commenters seem to think they can simply ask a lawyer for advice regarding sales from their own site, while others assume they aren't liable for some reason or other, obtained from soneone or other. In fact the sales and use tax laws in the US are muddled and even problematic. The long accepted assumptions of "nexus" is in question, as states and localities try and tax sales made over the internet to their residents. Plus there is a pending Supreme Court decision due this month or in early July that could utterly redefine the groundrules for taxation of sales made by out-of-state sellers. And certain states are not waiting for the the legal ruling: Illinois has decided to tax all "economic" sales beginning in October of this year, while Iowa passed a law to tax Internet sales beginning in 2019. With all due respect, I suggest many local tax accountants and business lawyers are probably uninformed with respect to the current ecommerce tax issues in states other than the one where you're operating.

If you are selling direct you need to get the real information, or risk a costly audit and potential legal action down the road. My business (not legal!) advice is to:

1 Not ask me for help or guidance.
2 Do the basic research on nexus using the many free resources online.
3 Subscribe to the free monthly Sales Tax Institute newsletter at salestaxinstitute.com.
4 Sign up for free at Taxjar.com and gain access to their well-organized, hugely helpful archive of state-by-state data. It is kept up to date, right down to the local sales taxes.

I won't go into non-US taxes, other than to say I've found the (free) library of "foreign" resources at Avalara.com to be very helpful. Uniquely among smaller business tax services, Avalara.com has actual service offices in six or so overseas locations, as well as numerous offices around this country. For a seller who is wide, their info is a good starting point IMO.
Today's long-anticipated ruling places even more of a premium on going to the source experts in sales tax collection and filing, as listed above. There is no need to panic, but be sure that for Indies selling direct in the US, this issue is not going away. The idea that our useless Congress would actually write a comprehensive law covering inter-state sales tax administration is wishful thinking.

As for brkingsolver's concerns:
brkingsolver said:
We were planning to open an online business by the end of this month. I'm suddenly having to rethink the whole thing. While my payment processor will collect the taxes, figuring out who to pay will be an incredible headache....

Some definite opportunities for companies to process sales tax and remit the money to the proper jurisdictions. Will my PayPal business account start such a service, or will I have to contract with another service? And who in the h*** is going to do the accounting?
The hope that PayPal or one of the payments processors will suddenly decide to enter what is one of the most complex application areas, and do so successfully with a full-function high-quality service, is ill-founded. The US has two well-qualified, deeply-experienced services to handle this problem, and I've found their prices to be reasonable. Taxjar.com is IMO better suited to smaller scale online sellers, but we plan to use Avalara.com as well, for our international sales. If Indies buckle down and read the freely available and well-presented materials I've recommended, they'll learn this is simply one more vital aspect of running a retail smaller business.

The hassle factors inherent in operating a sustainable small national retail business are endless. But the out-of-pocket costs are not high, in fact, if one plans well and is disciplined. The opportunity is high. A chance to reach a national or global audience and build a reader base that is outside Amazon, for starters. If your business plan shows you can reach as little as 100K in annualized gross direct revenues within, say, three to five years, then direct sales is a viable avenue for most self-pubbers. But if you do not know how you will market to achieve that minimal sales level, roughly 25,000 fairly-priced ebooks per year, IMO you need to go back to the drawing board before blithely plowing ahead.

To give up the option without doing the homework is foolish: as Amazon continues to deteriorate as a bookseller, as the other stores struggle to provide a viable alternative venue to buy books, we'll see services vendors such as Taxjar and Avalara, WordPress, Woo Commerce and Stripe, and, especially, Bookfunnel create the building blocks an Indie needs to build and grow a sophisticated direct sales business.
 

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PayPal supports Taxjar as an extension. According to their website, about $1,000 a year for them to take care of it all for you, assuming you take all your payments through PayPal.
 

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Thanks for the info about Taxjar. It's still waaaaay out of my reach, but maybe one day...
 

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Content removed due to TOS Change of 2018. I do not agree to the terms.
 

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Kessie Carroll said:
What does this mean for us, selling through Amazon? Will we be responsible for managing taxes everywhere our books are sold, or will Amazon?
It won't mean anything because it is Amazon who is doing the selling, not you.
 

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Tulonsae said:
Now, maybe the states have made it simpler since then.
The estimate I saw yesterday in one analysis said 10,000 entities collect sales taxes. Five or six states do not. But most places you have state, county, and municipal taxes stacked.

Years ago, I worked on a contract in a state that levied sales tax on services. We had the vendor deliver their work to a branch office in a different city to save .75% in tax. Over the course of the contract, we saved $65,000.
 

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Discussion Starter #35
People are well-accustomed to paying sales tax. This change will mean they cannot avoid the sales taxes they have since the 1992 decision. The major net effect will be that states receive from $25 to 50 billion in sorely-needed revenue to pay for education, healthcare, and public safety. Businesses will use the various services to handle the messy job, but the cost to all but a few businesses will be manageable. The policy on out-of-state sales and sellers has been thoroughly debated for 25 years. Yes, e-commerce has boomed since 2000 in some degree by allowing customers to buy goods tax-free. Now that period will end.

Kyra Halland said:
Thanks for the info about Taxjar. It's still waaaaay out of my reach, but maybe one day...
Having just spent hours over the past few weeks on pricing out the two major services, I caution anyone from jumping to the conclusion their small online store cannot afford to have taxes collected. That is a piddling expense per transaction. As to the grungy task of filing reports, you can minimize those expenses, too. But you will have to invest time up front to understand the pricing and state-by-state variabilities. You can not simply look up a one-price-fits-all-small-businesses number on their sites. I ran the second largest US commercial computer services company, including preparing sales and payroll taxes and can verify why the report-and-filing part of the service simply has to be priced carefully. But I won't explain it here.

The case for selling books directly on your own site is an economic one. If your marketing strategy is sound, and your books are appealing to a solid niche audience, and your pricing is fair -- to you -- your plan is not going to be materially impacted by the now-additional relatively minor expense of filing state taxes (if they even apply in your specific case).

Edited to remove political commentary, which is not allowed here. --Betsy/KB Mod
Edited to remove a quotation from a moderated posts. Drop me a PM if you have any questions. - Becca
 

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ibizwiz said:
People are well-accustomed to paying sales tax. This change will mean they cannot avoid the sales taxes they have since the 1992 decision.
You should be, though. Apart from those who simply wilfully ignore that something has changed, the late VAT laws have killed every other rsp third small web business (regardless of type) in the EU right in the tracks. Meaning that not just existing businesses closed shop, there were also many budding internet businesses which decided not to open at all, even though in the last phase of preparation for opening. From what I have read in this thread, your sales tax changes have every chance of being just as obnoxious for the average single owner internet business as our VAT changes are.

The point of no return is much lower for small businesses and single owners.

ETA: this is the number one reason why I won't be offering any books on my own website any time in the future, apart from the ever worsening legal infrastructure in general.

Edited to adjust quoted post. Drop me a PM if you have any questions. - Becca
 
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Just to bullet point clarify a few things, as some posts seem confused:

1. In the U.S., sales tax is applied at the point of final sale, not the point of origin or manufacture.

2. Sales tax is owed BY THE CONSUMER, not the retailer or manufacturer However, the retailer is required to collect and remit it.

3. Before this ruling, retailers were only required to collect sales tax if they had a nexus (physical presence) in the state. The court has ruled that, as it is the CONSUMER that owes the tax and not the retailer, the physical location of the retailer is not relevant.

4. Essentially, if you do business in a state, you are bound by that state's laws. Whether you are physically IN the state at the time the transaction takes place is besides the point. I don't like it. It is going to be a pain, but this is true and legal until such time as Congress fixes it (which will be sometime around never...)

Seriously, if you think about it, it makes sense. Otherwise, contract law is just void. If I am in ************* and I have an author sign a contract who lives in Texas, does it make sense for that author to later say, "Well, I don't live in ************* and I didn't sign the contract in *************, so even though I signed a contract with a ************* company, it isn't valid!"? It is why insurance generally can't be sold across state lines, because an insurance company in Florida would have to follow the law regarding insurance in North Dakota and if those laws are more stringent, they can't just say, "Well, we aren't PHYSICALLY in North Dakota, so we don't have to follow that law."

5. Being overseas doesn't take you off the hook. Because, again, if you are doing business in a foreign country, you are bound by that country's laws. That is why everyone had to jump through hoops to update their mailing lists because of EU privacy changes. If you have subscribers in the EU, you are bound by that law. That is why if I ship a hazardous material from ************* to Canada, that shipment has to abide by the laws of BOTH the U.S. and Canada.
 
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ibizwiz said:
The case for selling books directly on your own site is an economic one. If your marketing strategy is sound, and your books are appealing to a solid niche audience, and your pricing is fair -- to you -- your plan is not going to be materially impacted by the now-additional relatively minor expense of filing state taxes (if they even apply in your specific case).
I think you are underestimating how cumbersome this is. Every state has unique requirements for filing. As do the hundreds of municipalities that have their own requirements. Tax compliance is a major expense for large corporations, and even they often get it wrong.
 

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Mark Gardner said:
The first time I got hit with a $4500 tax bill on royalties, I was shocked.
I do not think anyone has a problem with income tax. It is logical, it is easy to pay, it is a one-stop thing, and you know what you're in for when you start earning any sort of income.

Being knowledgeable of and applying hundreds of different taxes and taxation levels is something entirely else. The typical small one owner business on the street, meaning your normal shoeshiner, hot dog vendor, flower girl or icecream seller has little more to do than hand over their bills and income sheets to a mediocre, low pay accountant and is done with everything. The problem is: this is not anymore sufficient for someone doing business in a similar manner over the internet. No cover designer located in Brixton is able to afford the internationally savvy legacy accountant they would need to be sure that their entire business arse is covered.
 

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Discussion Starter #40
Bards and Sages (Julie) said:
I think you are underestimating how cumbersome this is. Every state has unique requirements for filing. As do the hundreds of municipalities that have their own requirements. Tax compliance is a major expense for large corporations, and even they often get it wrong.
Actually, Julie, I know full well how cumbersome this is, from ten years as an online merchant, and seven as a business services CEO helping 15K small to very large businesses manage their tax info. That's why on our launch task chart for the new selling site I earmarked sales taxes as an item I would research personally. I have done so. I've offered KBoarders free educational links to jumpstart their own crash education (if they feel they need it yet.) I've also done the deep dive into pricing and plans and worked out a very low-hassle, low-cost solution for our business through the balance of this year and next. As others in the thread have recognized, the realistic solution to minimize this particularly messy but necessary task is to use an experienced service. I am not representing anyone here, just my own interest.

I strongly advise others to get some free education before making blanket statements here, especially about specific states. And even then, we'll need to track each state, since the cash-starved governments will rush to get an out-of-state tax law passed ASAP. The sources I recommended will do this tracking for you. For no charge.

Mark Gardner said:
I think that one of the issues is that many indie authors think of writing as art or a hobby, rather than a business. We need to think of ourselves as a business especially when it comes to taxes, distribution, and entity. ... We should be protecting our trade names, and collecting sales tax to fund roads, or open space or whatever our communities use sales tax for. We should've already been collecting sales tax in municipalities that require it. Claiming that doing what's required is too hard or is somehow onerous is the exact attitude that results in negative connotation for the indie and self-pub'd from consumers and trad-pub'd authors and publishers. We're indie because we're in control of our own destinies. And as the idiom goes, what doesn't break us makes us stronger.
This.
 
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