Art Storefronts has done a lot of research on, and has spent considerable sums seeking professional advisement on how artists should be charging sales tax in the United States. The goal here is to provide you with the best advice we can. However, it must be understood that we are not tax accountants and we are not providing professional advice. You should still do your own research and if necessary, contact a tax professional in your local region.
The “Wayfair Ruling”
On June 21, 2018, The United States Supreme Court ruled 5-4 in South Dakota v. Wayfair that states can mandate that businesses without a physical presence in a state with more than 200 transactions in state, or $100,000 in-state sales, collect and remit sales taxes on transactions in the state. This was a big decision that affects every single business in the United States. Whereas beforehand you did not have to worry about sales tax if you did not reside in a state, now you may have to collect and remitting sales tax in every state you sell, so long as you meet those minimums (or the updated minimum from each State, which tend to be around 100 transactions per year instead of 200). Regardless of this, it has and still is the case that you must collect and remit sales tax in the State you reside. This applies to every business in every industry. It in unavoidable, and irrespective of how much you sell. Every business is supposed to register for a “Seller’s Permit” with their State, and after doing so, you will receive a “Resale Certificate” (depending on the State you are in, they may have a different name for this, but in general we refer to it as a Resale Certificate).
What is “Nexus”?
Before we move forward, it is important to explain what “nexus” means in terms of sales tax. A business has “nexus” in a given State if it is determined to have a “tax presence” in that State. As described above, you will definitely have nexus in the State you reside in. You will also have nexus in any State you ship products into (as determined by the shipping address) so long as you do more than $100k of sales for shipments into that state or 100 transactions on an annual basis. Most artists will not meet this threshold for states outside of their own, and until you do, you don’t need to worry about it.
How Does this Impact You and Art Storefronts?
The information below only impacts you if you are using a Fulfillment Partner on our “Fulfillment Partner 2.0” program. Currently, the only fulfillment partner on 2.0 is Graphik Dimensions. We expect other fulfillment partners to move to 2.0 over time, but this may take a while. Until then, if you are using a fulfillment partner other than Graphik Dimensions, they will be charging you directly for sales tax on your vendor purchases. Art Storefronts currently has nexus in Texas, the state we reside. At a certain point, we may have nexus in other States in the USA. We are responsible for collecting and remitting sales any shipment going into a State where we have nexus. Therefore, any print fulfillment order (i.e. vendor purchase) where the shipping address is one of these States will be subject to sales tax. This means you will see a sales tax charge on any vendor purchase into a State where we have nexus, unless you have uploaded a Resale Certificate file for that state within your Art Storefronts site manager and we have approved it. It is important to know that if we charge you sales tax for a shipment into Texas (or any State where we have nexus), this means you SHOULD NOT charge tax to your customer in addition to us charging you. You only should charge tax to your own customer if you have an approved Resale Certificate and are tax exempt with us. This is because your Resale Certificate makes you responsible for collecting the sales tax, rather than us.
You will not be charged Sales Tax by us for any vendor purchases that have a shipping address that is not within one of the States where Art Storefronts has nexus. Whenever Art Storefronts has nexus within a new State, we will make a formal announcement via email to inform everyone that we will need to start charging Sales Tax for a new State.
How to Submit Your Resale Certificates and Become Tax Exempt for Specific States
You can do this in the “Taxes” section (which you can get to from the “Jump to” menu), under the “Tax Exemptions” tab. Once you submit this Resale Certificate to Art Storefronts, we will be notified. We will review it within approximately 1 week, whereby we will either approve it or decline it. You will receive a notification by email once this happens. By “approving”, this means we will make a permanent update to your Website so that you will not be charged sales tax by Art Storefronts for your print fulfillment orders (i.e. “vendor purchases”) that ship into that State. If you are not located in Texas, and you have a resale certificate for your home state, it is not a bad idea to just upload it. If, or whenever Art Storefronts has a nexus in your State, you will already be ready.