Books Front Matter

What are Sales and Resale Tax Certificates and Why Do You Need Them?

Disclaimer: The following article is for general background information only. We are not tax experts. For tax information or guidance in your particular state, consult your tax professional.

If you’re a book publisher or reseller, you likely know about sales certificates. If you don’t, however, it’s important that you learn all you can. That knowledge can help your business save money, time and effort, and keep you out of legal trouble with your state’s treasury department. Here’s what you need to know about tax certificates and how Sheridan can help simplify the process of getting and using them.

What are sales or resale tax certificates?

When a company purchases a product from another company, it generally must pay sales tax on those items. When a company purchases an item and then resells it, it must charge the buyer sales tax. To avoid taxing an item twice, the reseller can obtain a tax certificate, also called a reseller certificate, which exempts the reseller from paying taxes on the items intended for resale. What does this mean for printers and book publishers? The majority of publishers purchase their books wholesale from the printer with the intent to resell them. So to avoid paying sales tax on the printed books, the publisher needs a sales certificate. That sounds pretty straightforward; but there are a few more details you should know to help you navigate through all the policies.

Sales tax institute definition

Before we get into the details, it will be helpful to define a few things. Nexus, in general, means a connection. The term nexus is used in tax law to describe a situation in which a business has a “nexus” or tax presence in a particular state or states. A nexus is basically a connection between a taxing jurisdiction, like a state, and an entity, like a business, that must collect or pay the tax.

Not all states are alike

What makes sales certificates for publishers less than straightforward is that the Treasury Department of each state has different regulations and processes for obtaining them. A publisher is required to have a tax certificate for every state in which it has a distribution center. Basically, a business must register and get a tax number for the state in which it is located. This means you are registered and required to collect sales tax. You then use that tax number when you go online to apply for a tax certificate for reselling.

Although Sheridan has nexus in most taxable states in the U.S., not all printers require tax certificates. It depends on the state they are registered in and their practice of collecting or not collecting sales tax.

To find out about your state-specific tax certificates, visit the Department of Revenue website for your state and search for “sales tax.” Then follow the instructions for obtaining your certificate.

How Sheridan smooths the process for publishers

At Sheridan, when we set up an account for a new client, we send them the certificates we know they will need as a blank form with our welcome letter, welcoming them to the Sheridan family. At a minimum, we send them the certificate forms for their home state, as well as any states we know we will be drop shipping to (i.e., where they have a distribution center). In some cases, we can use a multijurisdictional form, which encompasses 27 states, so it’s much smoother. Publishers simply follow the instructions to complete the form(s) to apply for their certificate. As their business grows over time and they set up new distribution facilities, we will send them additional forms for those states as well.

By following the tax rules appropriately, publishers and printers can protect themselves from potentially incurring hefty government fines and consequences should the rules not be followed.

If you’d like more information about tax credits or how Sheridan can make the process easier, contact your Sheridan representative for a consultation.

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