Sales Tax

Wherever you sell your art, you may need to pay sales tax. You can do this in one of two ways. You can wrap the sales tax into the price of your work and do the reverse calculation– making it easier to sell work to your customers in nice round numbers. Or- you can add the cost of tax to the price of your work at the end.

For example $450 plus tax = $450 + 8.5% = $450 + $38.25= $488.25. OR $450 including tax equals a price of $450 for the consumer. You  then have to do the reverse calculation to find out how much you owe the state. Therefore: $450 – $35.25= $414.75. I like these 2 sites to figure it out: sales tax states and ConvertIt. Whichever way you do it, you are required by law  to pay those taxes to your state. Each state has different rules about this- and even different municipalities. Pay attention to where you are!

Sales Tax Guide for Artists


Forty-five U.S. states and Washington D.C. all have a sales tax. States and local areas use sales tax to pay for budget items like schools and roads. But states don’t collect sales tax from citizens directly. They rely on business owners like you to collect it from your buyers and then remit it from time to time (usually monthly, quarterly or annually.)

If you are an artist who primarily works from your home or studio, then you might only have sales tax nexus in your home state. However, other business activities can create sales tax nexus, including:

  • A location – a store, office, warehouse, factory or other location creates nexus
  • An employee – employees, many contractors, sales people, installers and repairers create nexus
  • A drop shipping relationship – Drop shipping can include using a 3rd party to print and send your designs, like t-shirts; depending on your negotiations with your drop shipper, you may have nexus if you drop ship
  • An affiliate – some states consider 3rd party affiliates who send customers to your online store to create nexus
  • Art shows or craft fairs – In some states, if you sell within their borders for just a handful of days (such as at a festival or craft fair) then you have nexus there
  • Storing inventory in a warehouse – Storing inventory in a warehouse in a state, such as selling your Amazon Handmade products through Amazon FBA, creates nexus

Handling Sales Tax with In-Person Sales

 Whether you sell your artwork out of your studio or own a brick and mortar location, collecting sales tax in-person is one of the more painless ways to deal with sales tax.

The “point of sale” is important here. For in-person sales, the point of sale is where the two of you are standing while you make the sale. So you’d only be responsible to charge a single sales tax rate – the sales tax rate at the location where you are selling your items.

For example, you sell your items out of your studio in Sedona, Arizona, you’d charge all of your customers the 9.35% Sedona sales tax rate.

If you are selling from your booth at a craft fair in Duluth, Minnesota, you’d charge your buyer the 6.875% Duluth sales tax rate.

You can look up U.S. sales tax rates here.

Sales Tax at Festivals and Craft Fairs

Now say you travel across state lines to sell at a festival or craft fair. Does that create nexus? As with almost every sales tax question, the answer is “it depends.”

Every state is different when it comes to sales tax on temporary sales such as at a craft fair or festival! Some states provide a wealth of information or special publications just for festival vendors. Other states treat every seller – from people who own in-state retail stores to people who are coming to the state to make sales for just a single weekend – just the same.

For example, when selling at a craft fair in Arkansas (as an out-of-state vendor) you are required to collect sales tax and turn it into the festival organizer daily. In Colorado, you are required to register for a “special event” sales tax license. But in Georgia, you are not required to register for a sales tax permit at all as long as you don’t make sales in the state for more than 5 days in the calendar year, or don’t collect more than $100,000 in sales over the course of the fair.

Sales Tax when Selling Online

Selling online is when sales tax starts to get tricky. If you only have nexus in your home state, you are only required to collect sales tax from buyers in your home state, even when selling to people all over the country online.

Though, unlike with in-person sales, the sales tax rate you charge your customers will likely vary when you are selling online. A handful of states are what is known as “origin-based” sales tax states, where you charge every customer in the state the sales tax rate at your business location. But most states are “destination-based” sales tax states, meaning you are required to charge your buyer sales tax at the sales tax rate at their ship to address.

Sales Tax on Shipping

When selling online, you also need to take sales tax on shipping into account. About half the states consider any shipping charges you charge your customer to be a taxable part of the sale. The other half say that shipping is non-taxable as long as you separately state the shipping charges on your invoice.

Filing your Sales Tax Returns

So you’ve done everything right and have been charging sales tax to your buyers. Soon enough, your sales tax filing due date will roll around.

Sales tax filing due dates vary by state, but are generally either monthly, quarterly or annually. As a general rule, the more sales tax you collect from buyers in a state, the more often that state is going to want you to file a sales tax return.

If you only make in-person sales from one or two locations, filing a sales tax return is fairly simple. You just tally up how much sales tax you collected from buyers in a state, find your jurisdiction or jurisdictions on the state sales tax filing form, and enter how much you collected. You will likely have to break down the amounts you collected in state, county and city taxes, but if you only have one or two locations this is fairly doable.

On the other hand, if you sell online and have collected sales tax from buyers in many jurisdictions, filing sales tax is much more difficult. Keep in mind that states and local areas all use the sales tax you collected to pay for things like schools and fire departments. Because of this, states require that you break down how much sales tax you collected by state, county, city and other district so they know how to allocate the sales tax funds you are going to send them.

If you made online sales and collected multiple sales tax rates, filing your sales tax return can quickly turn into a time-consuming headache.

Etsy

The most popular handmade marketplace on the internet needs no introduction. But when it comes to handling sales tax, Etsy gets a little more complicated.

Etsy does not calculate how much sales tax you should collect. Instead, they allow you to enter how much sales tax you want to collect from buyers by state and zip code. This works great if you live in an origin-based state. You can simply tell Etsy to collect the same amount of sales tax from all buyers.

But if you live in a destination-based state where you are supposed to collect sales tax based on your buyer’s ship to address, you’ll be required to enter all the sales tax rates from your state. Ouch! They also only allow you to enter sales tax by 5-digit zip code, which, while mostly accurate, doesn’t always get it right.

 

24 thoughts on “Sales Tax

  1. I find it surprising that Etsy doesn’t regulate how much sales tax a business should charge by state or location a business is selling from. As an owner of a business do you file all your taxes (personal and business) at one time or do you do it separately? Can an owner claim themselves as a dependent on their business taxes? Do businesses receive tax breaks for donations as well?

  2. I learned that I need to be conscience of the sales tax laws and how they may differ between New York and New Jersey and wherever else I may end up selling work after college. My question is what the best way of keeping track of sales tax when traveling and selling work would be?

  3. I learned that sales tax is something, just like pricing your work, that needs to be calculated and considered. Also that I need to be keeping better records of what I’m selling, for how much, and to who I’m selling to. Does sales tax also play a role in transactions through galleries or other parties like that? or is that handled by the gallery since the sale is technically going through them?

  4. What I learned was how to fill out a sales tax returns and that it varies with each method of selling you choose to do. Is it okay to put off all your tax returns until close to the deadline or should you do it right after the sale?

  5. While I knew that sales tax was a thing, I didn’t know that it should be such a carefully calculated thing–just as important as overall price calculating. What are the best systems or ways to keep track and calculate overall sales tax as well as over all finances–especially in regards to keeping track of it all over long periods of time?

  6. It’s interesting that Etsy doesn’t regulate how much sales tax should be charged, and you can determine the price but when it comes to filling do you submit your sales tax return all at the same time or can you do it day by day?

  7. The methods of how to include sales tax and be overall aware of filing it is great to know! The first line where it says you “may” need to pay, what are the situations where we would not? Is it just the laws in different states or are there events or interactions that would void a sales tax?

  8. I honestly had no idea that sales tax even existed for products like artwork, so everything in this article was very new to me. The number one thing I learned though is how to integrate sales tax into the original price of a piece. One question I still have is how taxes come into play when shipping/selling internationally.

  9. I learned that you need to very carefully make notes of where you sell a piece and how much tax you charged because states like to know exactly where the money should be put into. What would be the best way to keep track of the tax on every item and if someone is selling the work for you, are you responsible for declaring it or they?

  10. I was surprised to learn how much sales tax relies on something physical, where are you physically making the sale, what state am I physically selling from, what location do I sellout of and is it mine. Online sales tax is the most confusing to me. Do people outside of your state buying online not have to pay the tax because they don’t live in your state? Does that mean that the “thing” that is being taxed is my physical location in the world? Is an online store considered a store that can be taxed even if it is not a tangible building?

  11. Tax calculation is always the most troublesome part every year. It could be very complicated with online sales and selling something with your own. Is there any example that could show us the whole tax form and how to calculate all these tax?

  12. I think after reading this I’m going to be more aware of sales taxes in different places around the world in the future. Its useful knowledge to learn ahead of time, instead of arriving at a different location and having no clue how to price your work. I now wonder how you would go about selling your work on an online store to people in other countries.

  13. when i was in Ireland last December the ceramics that were being sold in this shop were priced very low, like around 20 euro for a mug. i know theres the conversion rate but i find it interesting that here in america a should be sold for much more. so I’m wondering how should i price my work if i want to sell outside of the united states? or even online.

    • I think it’s best to include the sales tax in your price no matter what- then take out the sales tax after the sale (this means bumping up the price a bit). You can do this pretty easily with one of these online reverse sales tax calculators.

      Another reason to do this for your website is that your don’t have to charge sales tax to people purchasing out of state- only to New York Residents. Rather than setting up our shopping cart to figure this out (more forms for your customers to fill out), it’s easier to keep all your prices consistent. Does that make sense?

  14. I didn’t realize Etsy doesn’t calculate sales tax automatically. I think it’s best to calculate sales tax into the price of the work itself just because people tend to like sticker prices more than they like doing math to figure out the overall price.

  15. It never really occurred to me that there would be different tax rates and types according to where I might end up selling. I’m really bad at math so having sample math of how to calculate tax is really useful.

  16. For some reason, all of this stuff does not click with me and I find it super confusing and intimidating. Maybe this will make more sense in practice, hopefully. What is nexus? is New York an origin state. Do you have to pay a sales tax after each sale? How to you pay these taxes?

  17. My experience living in different areas has definitely acclimated me to understanding that different tax rates occur in different states. I’m confused as to what nexus means, however.

    Is there a certain threshold for having to file a sales tax return for NY state, for example? Like, I’ve sold maybe a couple hundred in credit card sales, and I’ve collected the proper tax rate, but how do you go about looking into paying?

  18. This is all so convoluted and I’m glad I am learning that now. I know some websites of art material suppliers won’t tell you what shipping and tex is going to be until after you have confirmed a sale and then they email you an invoice with the breakdown. Is it easier to break it down after you have the seller’s information? I’m still a little confused on how this works, I will probably have to read more into the subject. I plan to sell mostly online so, I imagine this gets pretty convoluted with all the different state rules.

  19. I think sales tax can get pretty confusing sometimes, but this article made it comprehensive. I like that it broke down each section of information, working in order, and answered all of the questions that I had.

  20. I know that when museums hold solo shows for artists those shows often include accessioning a work by the artist for the museum’s collection. Do you know how texted work in situations like that? Is it usually dealt with through the artist gallery representation?

  21. I have already sold work, been to Farmer’s Markets, have my business license, and file for sales tax. I had my mom help me navigating it and for the summer when this all started and I had to file my sales tax I just put zero in for now. When should I actually make the shift to charge sales tax and keep track of it? Is it when my audience grows a bit more?

  22. Sales taxes is a beast I have frugally tamed. My operations aren’t that large, as I said in a previous post. The best part about credit and online sales is that there is a digital track record of those sales. In person sales are recorded, and I admittedly should do a better job of documenting those transactions. I also remember you saying the significance of getting the contacts of costumers, even for small sales.

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