North America Sales Tax for Envato Market

Summary: This article outlines sales tax information for Authors selling to customers located in North America, including your obligations and an introduction to our US Sales Tax Tool.

Introduction
Guide to sales tax when selling to buyers located in marketplace states
Guide to sales tax when selling to buyers located in non-marketplace US states
What do authors need to do in relation to sales tax?
       Sales Tax Tool
       How do you use the tool?
       The key features of this tool
       What is Sales Tax Nexus?
Quebec Sales Tax Information for Authors

Introduction

Sales tax is a consumption tax imposed by US states on sales of certain goods and services that occur within their jurisdiction. The particular rules and tax rates vary from state to state.

Sales taxes are imposed on the recipient of the goods and services, but in some cases are required to be collected by the seller or, if a sale occurs via an online marketplace, by the operator of the marketplace.

In this article, we provide information regarding sales to two types of buyers:

1. Buyers located in marketplace states
2. Buyers located in non-marketplace states

Guide to sales tax when selling to buyers located in marketplace states

If the buyer in your sales transaction is located in a marketplace state, Envato collects and remits sales tax in respect of the taxable components of your sales transaction (where required by applicable state tax rules). The “marketplace states” are:

Who is responsible for collecting and remitting the sales tax on purchases of buyers in the marketplace states?

Envato collects and remits sales tax on the taxable components of a sale transaction to customers in the marketplace states, where required by applicable marketplace rules in those states. You should obtain your own tax advice regarding your tax obligations.

Guide to sales tax when selling to buyers located in non-marketplace US states

This section is intended to provide information for authors when selling to buyers located in US states other than the “marketplace states” (we explained “marketplace states” in the section above).

What do authors need to do in relation to sales tax?

You may be obliged to collect sales tax on your sales transaction via Envato.

You will need to contact your tax advisor to understand your obligations in relation to collecting and remitting sales tax.

Although the advice you receive will be specific to your situation, here are some questions you might want to ask your advisor (for each state that applies to your business):

1. Do I have sales tax nexus in a US state? In which US states? (We provide further guidance to this in the FAQ below)
2. Are the items you sell taxable? (For most Envato authors based in the United States, the answer is probably yes, but check the details for your state and situation.)
3. How much sales tax should you charge? The rates vary by state and by county, so check with your accountant or relevant state authorities to find out.
4. Do I need to register with a state authority before instructing Envato to collect sales tax on my behalf and, if so, how?

Based on the advice you receive, you can configure your Envato profile with the relevant tax rates in the states where you have nexus.

Sales Tax Tool

As a marketplace platform, we want to help US authors to meet their obligations. We offer a tool to help authors to collect sales taxes on top of the relevant transactions. Whether or not authors use this tool is entirely up to them.

Below is an overview of the tool available to you, and how our US authors can use it.

Please note: you will not need to use this tool for sales transactions where our “marketplace states” rules apply.

How do you use the tool?

1. Visit your Envato profile and navigate to the US Sales Tax option in the Author Tools section under Settings.
2. Select your state from the dropdown list.
3. Enter a tax rate and press ‘Apply’.

If your state is not in the dropdown list it is because it is one of the “marketplace states” in the list in the top section of this article. There is no need for you to manually collect tax in these states.

The system will begin collecting sales tax from buyers in the states you have selected.

The key features of this tool

• The ability to configure the tax rate for each state where they plan to collect sales tax.
• The tool will 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. The calculated amount will be added as sales tax to the existing item fees.
• Clearly presented amounts of sales tax collected on an author’s behalf on the statement/earnings account summary. The information will also be available on the downloaded csv statement 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 state) to item purchase and bundled support.

The tool will not

• Remit the tax collected to any state tax bodies. This is the responsibility of the author.
• Register any authors for sales tax purposes. This is the responsibility of each individual author.
• Keep or store the additional funds (collected through the tool) separately from an author’s earnings.

What is Sales Tax Nexus?

A “nexus” is a word which means that there is a connection within the transaction that would trigger the need for sales tax in a US state. The definition of nexus varies from state to state. As sales tax is a complex topic, we recommend you contact a tax professional to determine your responsibilities regarding this matter.

For example, nexus may be found based on:

• where you live or where you are located,
• where you have employees, or
• where you have an office or studio.

For most individual authors, “nexus” will likely just be in the state where you live. If you are an author team with members or an office located in different states, it may include those states as well. For your sales to customers who are located in those states where you have nexus, you may need to collect sales tax—depending on the local tax laws.

Eg. If you are based in California, you may need to collect sales tax on your sales to other customers in California.

Here’s an example of calculating and collecting sales tax:

An author has configured a nexus in Arizona with a sales tax rate of 6% and they have a presentation template for sale with a list price of $18 including a buyer fee of $3.

This will result in the following:

Any sales tax that you are required to collect may also need to be remitted to the state’s tax office in accordance with any state tax rules.  In the example above, this would be Arizona.

Quebec Sales Tax Information for Authors

For Authors selling to customers located in Quebec, Canada:

Quebec Sales Tax (QST) is a tax imposed by the Government of Quebec on sales of certain goods and services purchased by an end-consumer located in Quebec.

Revenu Quebec has announced that operators of marketplaces which allow remote sellers to sell their items to end-consumers located in Quebec have an obligation in certain circumstances to collect the QST and remit it to Revenu Quebec.

Although Envato collects QST from end-consumers in Quebec, and remits the tax to Revenu Quebec, it remains your responsibility to find out about your tax obligations in various countries, states and provinces.