Are Paper Products Subject to Sales Tax?
- Sales Tax
- January 25, 2017 | Suzanne Kearns
The global market for paper-based stationary products is expected to reach $226 billion by 2020, according to Global Industry Analysts, Inc. And a lot of internet retailers are taking advantage of the consumer demand. For example, the Pretty Paper Cottage shop on Etsy has logged over 5,000 sales and sells mostly handcrafted paper goods like their popular handmade stationary notebook. Retailers on Amazon, like the seller of this snappy travel journal, are also cashing in on the paper goods wave.
Are Paper Goods Taxable?
Because products like notebooks, stationary and journals are tangible personal items, they are taxable in most instances. The sales tax rates in states that require it range from 2.9 to 7.25 percent.
But some states provide exemptions for the products, and you’ll need to check with the states where you have nexus in order to determine whether any of your customers are entitled to tax-free purchases. For instance, New York exempts stationary, logbooks, scientific notebooks and other paper products as long as the buyer is a scientist, engineer, or technician and is using the product primarily to record qualifying research and development experiments.
In addition to the odd sales tax law, there are some other instances when you shouldn’t charge sales tax on paper goods.
- Sales Tax Holidays. Some states offer consumers the opportunity to purchase school supplies, including notebooks and other paper products used in classrooms, tax free. Florida, Texas, Ohio, and Alabama, are just three of the states that offer a tax-free school supply weekend. Some holidays exempt qualifying products from both state and local tax, while some don't require localities to participate. Be sure to check with the states you sell in to determine which weekends you should offer tax-free school supplies.
- Churches and Schools. Depending on the state, churches and schools may be exempt from paying sales tax on paper products. For example, in New Jersey, public schools and non-profit private schools are both exempt from having to pay sales tax on their purchases, but booster clubs, teacher organizations, and parent organizations may or may not be. Because every state handles these types of organizations differently, you’ll need to understand the rules in the states where you sell.
As you can see, the taxability of paper products can’t be determined with a one-size-fits-all approach. Instead, you’ll need to understand who your customer is, what their intended purpose for the goods are, and then research the rules in any state in which you have nexus.