In a previous post (click here to see it), I told you about how under the new agency model Amazon would be required to collect sales tax on eBook purchases for your Kindle. There are numerous news articles, blog posts, Amazon discussion board topics, etc. devoted to this subject and I am not going to burden you with another debate on it or what I think of sales taxes on Internet sales except for one thing: as an accountant in real life (no, I don’t sit around and blog all day in my underwear) the publishers should be careful what they asked for as they will have a lot of sales tax compliance to the various states, counties, and cities they never had prior to this agency model move. With most governmental entities hunting for pennies under the couch cushions these days, they should expect various audit teams in performing a root canal on their books.
Anyway, I digress…..
In connection with this move to charging sales tax, it all depends on which publishers have a physical presence in the various states – for example, if you live in Vermont you will not have to pay sales tax on eBooks published by Harper Collins Publishers as they must not have an office in Vermont, but you will have to pay sales tax on eBooks published by Hachette Digital, Simon & Schuster Digital Sales, and Macmillan. Sound confusing? You bet it is, but Amazon is making it a little easier for you to tell who the publisher is and avoid up to 10% additional surcharges on sales taxes – for example, take a look at Nicholas Sparks’ NY Times bestselling book The Last Song (click here to see the book in your web browser). Right under the pricing information you will see “Sold by Hachette Group” with the disclaimer “This price was set by the publisher.” Amazon puts that little disclaimer on the books sold by the publishers that forced them into the agency model for a variety of reasons, but you and I can look at it to see if we will be subject to sales tax on the potential purchase.
For me, this means if I want to purchase The Last Song (and I like Nicholas Sparks’ books), since I live in Texas the real price is $12.98 as we have an 8.25% sales tax rate.
The paper versions of Hachette’s books are published by a sister company called Grand central Publishing and are not subject to sales tax to me as Amazon doesn’t charge taxes on physical shipments to Texas residents (note, however, the Texas Comptroller has an opinion on that matter as Amazon maintains a distribution warehouse outside of Dallas but that is another topic for a different blog). As I am an Amazon Prime customer, I don’t pay extra for individual shipping charges, and get this: the paper version, sold and shipped by Amazon, would cost me $10.19
I imagine not too many customers will want to pay an extra $2.79 for an electronic copy of a book, especially when the cost to produce the electronic copy of the book are significantly less on a per-unit basis.
Are the publishers being greedy? I don’t know – but I do believe they really didn’t think this “agency” model through very well prior to falling all over themselves to please Steve Jobs in the implementation of it.
Obviously, more to come in the short and long-term as all of this is sorted out by the marketplace: good thing you and I will be looking even closer at the free book offerings.
In the meantime, straight from the Amazon website (click here for the full laundry list) the following is a partial list of merchants selling items at Amazon.com which may be included in your order, and the states in which they charge sales tax.
- Amazon.com LLC: KS, KY, ND, NY and WA
- Amazon Digital Services, Inc.: KY, ND, NY and WA
- Magazine Express, Inc.: AL and WA
- Synapse Services, Inc.: WA only
- Target.com/ITC: All states other than AK and VT
- Hachette Digital, Inc.: AL, AZ, CO, CT, DC, HI, ID, IN, KY, LA, ME, MS, NC, NE, NJ, NM, SD, TN, TX, UT, VT, WA, WI and WY*
- Harper Collins Publishers, LLC: All states other than AK, AL, AZ, DE, HI, MT, NH, NV, OK, OR, SD, VT and WY*
- Simon & Schuster Digital Sales, Inc.: All states other than AK, DE, MT, NH, and OR*
- Macmillan: AZ, CO, CT, DC, HI, IN, KY, ME, MS, NC, NE, NJ, NM, SD, TN, TX, UT, VT, WA, WI and WY*
* Kindle books sold by various publishers are subject to sales tax based on the publisher’s state tax reporting obligations and the taxability of digital books in those states. As a result, sales tax for Kindle books sold by the publisher may differ from the sales tax to which you’ve been accustomed for Kindle books.
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