Sales Tax and VAT Guidance

For the Direct integration

Arielle

Last Update 3 months ago

The following is not intended to be financial advice and we always recommend consulting CPAs and certified financial professionals about topics related to taxes.


However, many authors who are considering direct wonder... how do sales taxes work for me?


The good news is that by using Stripe Tax, you can easily automate the collection of Sales Tax and VAT in all jurisdictions globally. These taxes/fees will be collected on top of your list price.


Stripe Tax charges all authors a 0.5% fee only on transactions where Sales Tax/VAT are applied.


For most authors, Sales Tax and VAT will not be applied on most transactions due to a lack of nexus threshold.


Currently, Sales Tax laws in the United States are based around the concept of nexus. You will likely owe sales taxes (if applicable) in the state you live in/your business is located in due to physical nexus laws. However, you will not owe sales tax in other states unless you have economic nexus. The threshold for nexus ranges from $100,000 per year in California and 200 transactions annually in the state of Georgia. 


The key with this is that your revenue counts towards economic nexus in a state pending on where your readers are located. In the case of California, if you don't live there, in order to owe Sales Tax on your Ream revenue there you would need to generate over $100,000 in a single year from readers in that State.


Internationally there are different VAT limits pending in the country and you can even block readers from certain countries to avoid hitting VAT limits there (this guide is how you can do so). 


The good news is that Stripe Tax can monitor all these limits for you and let you know when you are beginning to reach the threshold.


As you approach the threshold in certain localities, you will need to register as a business there, which may have extra costs, and then file and remit those taxes on a regular schedule with those local authorities.


Due to this administrative burden, many authors decide to use Ream Managed, which is a different payout system where Ream is liable for Sales Tax and VAT. We give our authors options between Direct and Ream Managed because we believe Storytellers Rule the World and want to create as much optionality and opportunity for our authors as possible.

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