UPDATE: This tool is now Live! If you have any questions, please feel free to ask them below and we’ll endeavour to answer them
Hey US authors,
One of the challenges our finance team has been tackling over the past few months, is the question of how our US authors might be able to manage their US State Sales Tax through our platform. As US authors, you may may be aware, Sales Tax is a tax on the sale of goods and services in the US, but the rates vary between the various states, just as how and when US State Sales tax should be calculated and collected can vary widely from state to state (and even regions within an individual state) so this presented something of a curly challenge for our finance teams to wrap their heads around.
As a marketplace platform, we want to help US authors to meet their obligations, and we think we can do a better job of that by offering a tool to enable authors to collect sales taxes on top of their relevant transactions. We’re going to roll out that tool in September of this year. Note though, whether or not authors use this tool is entirely their decision.
Below is an overview of the tool we will be launching, and how our US authors can use it, as well as an overview of what US State Sales Tax is.
The key features of this tool are:
Authors can configure the tax rate for each state where they plan to collect sales tax.
The tool will then calculate the sales tax for purchases made by Customers who are located in the states that have been configured for sales tax by the author. This calculation will be added as sales tax to the existing item charges.
Envato Market will clearly present the amount of sales tax collected on behalf of the author on the statement and earnings account summary as well as each affected invoice and credit note.
If the tool is turned on by an author, sales tax will be applied where relevant (when both author and customer are located in the same US region) to all items.
What this tool won’t do:
Envato will not be remitting the tax collected to any state tax bodies. This is the responsibility of the author.
Envato will not register any authors for sales tax purposes this is also the responsibility of each individual author.
We won’t keep or store the additional funds collected through the tool in a separate account.
What is US Sales Tax and should I be collecting it?
Note: The below is an overview, if you would like a more in depth illustration of US Sales Tax and its place at Envato, check out our help centre article here.
Sales Tax is a tax that is applied to the ‘retail’ sale of property and certain services and is typically, collected by a seller (in our case, the author) at the time of a sale to someone (the customer) who is also in the same region that the tax applies. When a connection between a customer and a seller occurs, tax folk call it a “taxable nexus”, which is really just a fancy way of saying “a connection that results in tax being applied.”.
If you’re anything like me, seeing a diagram might make it easier…
If both the seller and buyers are in different regions, like in the top image, sales tax typically doesn’t apply. However if they share a region, like the lower image, and a transaction is made sales tax (or SALT) could apply.
So does it apply to the sale of Envato Market items?
What a “retail sale” is actually defined as, and by extension, exactly what goods and services have sales tax applied to them has a fair bit of variance between each US state, and even some regions within the state.
In other words, in some regions in the US the sale of Envato Market items might be taxable, in others they might not. The best way to know for sure is to contact your local tax authority or tax advisor.
How will this look for customers?
Customers for whom the US state sales tax applies will be able to see the addition of sales tax when they arrive at the checkout of the item, and beyond. We’ll be adding the words “exclusive of sales tax” on an item page, to ensure customers know what’s coming.
We will have more detailed information with the launch. In the meantime, we recommend taking a look into your current US Sales tax processes and understand what your obligations are.
Feel free to discuss the changes below! However, If you have any specific questions surrounding this, please contact firstname.lastname@example.org.