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Noooo... Not sales taxes! Ugh!!
I have been hearing a lot about the sales tax changes in the US lately, and I thought it would be helpful to discuss how things work in Canada when it comes to sales taxes and your book sales. This is for Canadian authors who sell their books directly to customers, whether that is through a website or in person.
Good news if you’re in Canada…
Books are exempt from provincial sales taxes!
That means you still need to consider federal sales taxes like the Goods and Services Tax (GST) and the federal portion of the Harmonized Sales Tax (HST) applicable in Ontario, Newfoundland, New Brunswick, Nova Scotia, and Prince Edward Island.
Whether you should be charging federal sales taxes depends on your gross revenue and where you’re selling your books.
Gross Revenue Exemption
Federal sales taxes are subject to a $30,000 gross revenue exemption which means if the gross revenue of all your products and services (not just your book sales) is less than $30,000 per year, you don’t need to charge GST or HST.
If you’ve already registered to collect federal sales taxes because you weren’t aware of this exemption, you need to charge the tax or cancel your registration.
If you, or a related person like a spouse, have a separate business that’s registered to collect federal sales tax, because of this connection, you will be required to register to collect federal sales taxes even if your gross sales are not greater than $30,000 and the business is in no way related to selling books.
Once your gross revenue goes over $30,000, you are required to register to collect federal sales taxes by the first day of the month following the month your sales passed the $30,000 exemption. If your gross revenue doesn’t hit $30,000 in one year, you start over the following year, but once you are registered to collect federal sales taxes, you are required to charge them even if you have a year where your gross revenue was less than $30,000.
Place of Supply
Federal sales taxes only apply to sales that are between you and your customer. If you only sell your books through Amazon or other third party retailers, you don’t need to worry about the sales taxes because those retailers handle it for you. Payments you receive from these retailers are royalties and they are NOT subject to sales taxes, but they are considered taxable income so you still need to report them on your income tax return.
If you’re selling books through your website or in-person at book signings, ect. you are required to charge federal sales taxes (if your sales are over the $30,000 exemption) if the book is being delivered in Canada. This is referred to as the ‘place of supply rules’.
Here are some examples:
You sell a book to someone in the UK or the US through your website. No sales taxes required!
While at a book signing in Guelph, Ontario, you sell 25 books. Charge federal sales tax if your gross sales for the year have passed the $30,000 mark, otherwise, no sales tax.
You decide to go on a book tour in the US and sell a lot of books while doing so. No sales taxes (but you may want to ask a US tax accountant if there is anything to consider from the US perspective).
Sales taxes can be confusing, but I hope this helps.
If you’re still not sure if sales taxes apply to you, let me know your questions in the comments or consult with your local professional accountant.