Did you check off the two first legal & financial steps for new artists in my post from last week? Before you move onto this week’s step, you’ll want to read that post and make sure you’ve got everything handled so that this week’s assignments can be done properly.
THE NEXT THING TO SORT OUT IS SALES TAX.
If you live outside the US, it may be called VAT or GST or any number of other terms used to describe fees a customer pays for each purchase that you, as the seller, then send to the government.
(Remember, I can only speak to how it’s done in the US but this may be a good overview or starting point if you live in another country since many countries have similar laws. However, I am only familiar enough with the laws of my own country to give you such specific advice.)
Sales tax is done mostly at the state level. So the rules can be a little weird when you’re selling online.
Any purchases made in person in the state in which you operate are charged sales tax. That’s pretty straightforward. You go to an art market in your town and sell something, the customer pays sales tax. How much they pay depends on your state, and also your county, so you’ll have to do a little research.
Find the website for your state’s department of revenue and it should give you the sales tax rate for your county.
Then go into the payment processors you use for in-person sales and set the sales tax rate. There should be a spot for it in the program settings somewhere.
Sales tax is usually only collected on online sales if the product will be delivered to an address within your state.
So if your customer is in Georgia and you’re in Ohio, no sales tax. But if you’re in Oregon and so is your customer, charge sales tax. Most online payment processors will give you the ability to charges sales tax based on the shipping address, so this should be easy to set up.
One thing to note is that services are typically not taxed in most states.
So if you teach art classes or design websites, those things wouldn’t have sales tax in most states. But any physical goods would.
Make sure you’re keeping track of the sales tax you collect from customers. Most payment processors will easily do this for you. But if you take cash for something, you’ll have to make a note for yourself of the tax you charged.
Next, look on your state’s department of revenue website for information about any forms you need to fill out in order to hand the collected sales tax over to them (called “remitting”).
States have different processes for this so you’ll want to check yours and create a system for yourself.
For example, many states require you to register for a sales tax permit or ID number before you begin collecting sales tax from customers.
Most states have monthly or quarterly filing periods, depending on how much you usually owe, and will give you an easy process for paying them either online or with a mailed check. Just make sure you pay it on time so you aren’t charged late fees.
A little tip for when your business is new and you’re excited about every penny you make – put the sales tax in a separate account every time you make a sale. That way you’ll know what amount you can’t touch and you’ll have it ready when it’s time to send the payment.
SO LET’S RECAP YOUR HOMEWORK, ASSUMING YOU’RE STARTING AT ZERO.
1 Google your state’s department of revenue website.
2 Determine your sales tax rate (that’s the percentage you charge your customers on top of the cost of your art).
3 File for a sales tax permit or ID number if required in your state.
4 Set up your payment processors (online and in-person) with the correct sales tax percentage.
5 Set task reminders in your calendar or to-do app for the rest of the deadlines for this year’s sales tax remittance.
Whoosh! I know it feels like a lot, but I bet you can tackle all of it in just a couple hours.
And then you can rest easy that this taken care of.
And remember – I’m not a lawyer nor an accountant so I can only give you anecdotal advice based on experience. Your business may have different needs than are assumed in this article. You are completely responsible for your own business decisions. When in doubt, go find someone who got a degree in law or accounting.