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Self-Publishing in Washington State

  • May 8, 2015 | Gail Cole

 Your readership awaits.

Once upon a time, self-publishing was not a lucrative option for most writers. But ebooks have opened a vast readership to authors spurned by traditional publishing houses. Last year, self-published authors earned more of the ebook author earnings than authors backed by the country’s top five publishers. Between 2008 and 2013, self-published International Standard Book Numbers (ISBN) rose by more than 400%. The industry is exploding.

In response to that growth, the Washington State Department of Revenue has published an information notice on self-publishing. It details the tax obligations of self-publishing authors in Washington who “use an online marketplace to market, sell and distribute” their books.

Generally, an online marketplace (like Amazon) and author agree on one of the following methods to distribute self-published books: a distribution arrangement or a granted right to copy and sell.

Distribution arrangement

Under this option, “the marketplace sells the author’s books on a consignment basis,” generally charging a fee for each sale. As is often the case with self-publishing, authors receive no advances.

The author must:

  • Collect and remit retail sales tax on book sales to Washington customers unless the marketplace collects and remits sales tax for the author.
  • Pay B&O (business and occupation) tax on book sales to Washington residents.

If the marketplace retains a fee for its services, the amount of that fee is included in the taxable amount for both B&O tax and retail sales tax. An example: for a book that sells for $10, the author must pay tax on $10 even though the online marketplace retains a $3 service fee.

Sales to out-of-state customers are not subject to Washington State sales tax of B&O tax. Such sales are eligible for the “Interstate and Foreign Sales deduction.”

Granting a right to copy and sell

Under this option, the author "grants the marketplace a license to use its copyrighted manuscript and the right to copy and sell the digital book.” Authors typically receive advances and help preparing the book.

The author must:

  • Pay the royalties B&O tax on the gross income received

Additional information is available at the Washington Department of Revenue.

The above information assumes that the online marketplace has nexus (or a connection that triggers a tax obligation) in Washington, as Amazon does. Self-publishers should be aware that tax is probably due on sales of their publications in all states where the marketplace has nexus. As of this writing, Amazon must collect and remit sales tax in 24 states. Check with individual state departments of revenue to learn your tax obligations in each state.

Another option: simplify sales tax compliance in all states by implementing an automated solution. Learn how it works.

photo credit: Kindle 3 via photopin (license)

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.