Thursday, May 27, 2010

Caesar Wants to Tax Your Sales--Part I

Raise your hand if you ever sell copies of your books directly to consumers during speeches or book fairs or even out of the trunk of your car. (Sales through bookstores or by consignment at conferences don't count.) If you have a license from and pay sales taxes to the state(s) where you make those direct sales, put your hand down. If you still have your hand up, read Matthew 22:15-22, where Jesus tells the Pharisees to "render unto Caesar the things that are Caesar's."

I don't mean to imply that anyone reading this post is intentionally ignoring the law. Many writers simply don't think about it, or they make very few sales and don't realize that even those few sales require a state license or registration. (Different states call them different things.)

Besides our obligations as Christians, there are other reasons for registering with the state. First, if Indiana catches you selling books without registering, it could fine you as much as $1,000. Second, a license is evidence that you treat writing as a business, which helps if you want to deduct your writing expenses from your income taxes.

Many states require business licenses or registration for selling goods, including books sold by the author, and Indiana is one of them. Since most of the people who read this blog are Indiana authors, I will use Indiana as my example. If you sell your books in another state, however, you should check out that state's requirements, too.

Most writers are sole proprietors--individuals who have not set up any special legal form for writing purposes. Even if the writer uses an alias or a pseudonym, the sole proprietor and the individual are one and the same person for legal purposes.

Indiana has a one-time application fee of $25, but the bi-annual renewals are free. You can apply online by going to www.in.gov/core/taxes.htm and clicking on "BT-1 Business Tax Application" under the Business Taxes heading. When the new page comes up, scroll down to the line that says, "Start a new BT-1 online application," and click on "start new." The form is mostly self-explanatory, but there are several things you should know.

If you are a sole proprietor, leave the Federal ID Number field blank unless you actually have one. Sole proprietors without employees rarely have (or need) the type of Federal ID number the form asks for here. (It will ask for your social security number later on.)

One page asks for your primary NAICS code. The NAICS code for independent artists, writers, and performers is 711510.

When filling out the personal information on that same page, a sole proprietor should list his or her name as the associate name (leaving the affiliate name blank) and give the title as "sole proprietor" or "owner" (either works).

If you write under another name, fill it in on the next page where it asks for "Business trade name or DBA." Otherwise, use your own name.

On the page asking what taxes you are registering for, check "sales tax." I am not going to talk about the other taxes on the list, but most of them are self-explanatory. The only one that isn't is "use tax," which is a tax on goods brought into Indiana for use, storage, or consumption rather than to be sold here. Most Indiana writers do not need to collect Indiana use taxes, but if you are unsure, contact the Indiana Department of Revenue.

The rest of the application should be self-explanatory. If you have any questions, however, contact the Indiana Department of Revenue by calling 317-233-4015 or using the e-mail form at www.in.gov/dor/3392.htm.

Next month I will give you tips on calculating, collecting, and remitting sales taxes.

Kathryn Page Camp

2 comments:

  1. Thank you, thank you! I copied this for my files for when the reality of this info will apply. :-) I knew I'd need to pay income tax, but I never thought about sales tax and the need for a business license. I agree, it's important for us as Christians to "render unto Caesar." *sigh*

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  2. Thanks, Kathryn, for sharing such vital info FREE! I became a sole proprietor business (Millie's Books) several years ago at the urging of our CPA (I'm married). Because my business is a "losing" one so far, it does indeed give us a nice tax break we wouldn't get otherwise. Hey -- I printed this blog for my hubby, as I will your next month's. Thanks again! :-)

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