Sale Taxes with kickstarter campaigns?

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Sale Taxes with kickstarter campaigns?

Unread postby Cards Enthusiast » Tue Jun 20, 2017 12:36 pm  

Hi,
I am planning my own ks campaign for playing cards and was reading a lot about things that need to be taken care of. And one thing I always encounter on blogs of ks campaigns, like the Muerto KS here in the forum, is that nobody seems to have paid any sale taxes in their ks campaigns. At least those are never listed on those blogs with all their costs. I am not talking about normal taxes from your gains, I am talking of normal VAT or sales taxes. As far as I could find on the internet everyone has to pay the sale tax in the state where he is selling his ks products in(isnt it 9% in CA right now?). I believe some states even mention this on their website specifically for ks projects. So either I am missing something here, and I would love to skip sale taxes, or these blogs that describe their campaigns are all doing it in a dangerous way.

I would love to hear any feedback about it and if it turns out we have to pay sale taxes then we probably should warn those bloggers that they might get into trouble with their postings.

Thanks
Chris
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Re: Sale Taxes with kickstarter campaigns?

Unread postby chach » Thu Jun 22, 2017 3:19 pm  

Well technically KS isn't a store, as they state many times on their website so I wonder if there's some sort of loophole there since funds pledged / received are more like investment funds rather than purchasing a product. Granted I'm not a CPA, don't work for the IRS and didn't even sleep in a Holiday Inn Express last night.
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Re: Sale Taxes with kickstarter campaigns?

Unread postby guru » Sat Jun 24, 2017 10:53 am  

Cards Enthusiast wrote:Hi,
I am planning my own ks campaign for playing cards and was reading a lot about things that need to be taken care of. And one thing I always encounter on blogs of ks campaigns, like the Muerto KS here in the forum, is that nobody seems to have paid any sale taxes in their ks campaigns. At least those are never listed on those blogs with all their costs. I am not talking about normal taxes from your gains, I am talking of normal VAT or sales taxes. As far as I could find on the internet everyone has to pay the sale tax in the state where he is selling his ks products in(isnt it 9% in CA right now?). I believe some states even mention this on their website specifically for ks projects. So either I am missing something here, and I would love to skip sale taxes, or these blogs that describe their campaigns are all doing it in a dangerous way.

I would love to hear any feedback about it and if it turns out we have to pay sale taxes then we probably should warn those bloggers that they might get into trouble with their postings.

Thanks
Chris



Chris - The following posts will help you for sure.

https://stonemaiergames.com/kickstarter ... -finances/.

https://www.kickstarter.com/campus/ques ... ded-income.

https://www.entrepreneur.com/article/246835.

http://www.crowdcrux.com/kickstarter-in ... lications/.
"Bharata Tarot Playing Cards" live on Kickstarter now: http://kck.st/2sPo8Zo."
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Re: Sale Taxes with kickstarter campaigns?

Unread postby Cards Enthusiast » Mon Jul 03, 2017 8:20 am  

Thanks for the links! After reading through it I am not sure if I got any step further unfortunately. I am a german citizen and I am also located in germany. My cards will probably be printed outside the USA while most of my customer live in the USA. So and now, income tax is not a problem for me. I just pay the usual stuff to Germany. But when it comes to sales tax I still have no clue how this works in the USA. All I found in those links was this:

What about sales tax?

Sales tax is a separate issue from income tax and is done on a state and local level, so we aren’t getting into this. Generally sales tax is based on selling tangible goods, you collect it and pass it on to the state. It is usually charged where your company has a physical presence, but states interpret “having a presence” differently.

This is basically what everyone says. But how is this workable? Does this mean if I sell to 20 different states and maybe 8 different countries that I have to fill out 28 different forms to pay sales tax or VAT? This is just nuts. So far from all the crowdfunding campaigns I have seen who share financials nobody ever paid sales tax. But it seems to me you have to. But for this to work I almost have to hire an accountant full time.

If any of the other kickstarter launcher has some insights here, or any accoutnant maybe, that would be great.

Thanks
Chris

One more thing I found about this topic: https://www.cnet.com/news/confused-abou ... not-alone/.
This is even more confusing since it states: "In fact, Connecticut's commissioner of Revenue Services, Kevin Sullivan, reminded Connecticut shoppers Monday that if an online retailer doesn't charge the state sales tax, the consumer must pay. He said that according to state law, Connecticut residents are still required to pay the state's 6.35 percent sales tax rate on items, even if the retailer hasn't collected the fee. And he said that online retailers are misleading taxpayers and putting them at risk of tax fraud by failing to collect the sales tax or advising customers to make sure they pay it."
Is that maybe the reason why not one kickstarter financial overview blog I found on the internet mention he has paid sales tax, since it is considered a customer problem in the US, at least in that state? I really do not know how that would work in the states, it seems very crazy to a german guy and we are suppose to have the most nuts tax laws...

And lastly now I found this for a case like mine, international online seller to US citizen: https://blog.taxjar.com/international-s ... s-tax-u-s/
If I understand this right I would have nexus where my not owned fulfillment service provider is located and also where Kickstarter.com has its server. I would have to pay sale taxes only in those 2 states assuming both ask for such (some states dont or have different nexus rules). Which means chosing the fulfillment provider by location could save my backers taxes and a lot of work. Seems still nuts to me...
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Re: Sale Taxes with kickstarter campaigns?

Unread postby guru » Mon Jul 03, 2017 9:22 am  

hmm...Germany...Okay.

I think it will be better for you to check with German game group on Board Game Geek. If the following link doesn't work for you, then ask in crowdfunding group on BGG specifically mentioning that you are from Germany.

https://boardgamegeek.com/forum/97/boar ... ek/germany

or this link: https://www.reddit.com/r/germany/commen ... funds_tax/
"Bharata Tarot Playing Cards" live on Kickstarter now: http://kck.st/2sPo8Zo."
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Re: Sale Taxes with kickstarter campaigns?

Unread postby Cards Enthusiast » Mon Jul 03, 2017 1:05 pm  

So I have now spent the entire day checking on this stuff and for all who are interested in launching a kickstarter campaign but do not want to play russian roulette with the law, here is what I believe to be the easiest approach for sales tax:
Register with http://www.streamlinedsalestax.org/inde ... egistraton which is basically a government organization that took around 30 states under one roof for sales tax reasons. Then get a sale tax software that is certified with all states like this one here http://www.streamlinedsalestax.org/inde ... age=taxify. It cost only a few dollar per month and you only need it 1 month for your kickstarter campaign, a no brainer! Well and then you need to register probably with 20 to 50 states for the sales tax ID. But this is all doable now, one day work probably at the most. Sales tax seem to be around 6-8% in most cases.

This is really all hardcore stuff I must say and doesn`t take into account any non US sales. Probably all sales outside USA need another mountain of paperwork... But as I see it right now in blogs and forums most if not all kickstarter campaigns simply ignore sales tax or VAT and risk it. So far I have not heart from any law suites because of this. But this doesnt mean it is safe. If each state can sue you for thousands of dollars for not paying sales tax this means you life ends right here (depends a bit if you consider a life without money a life :-)).

To sum up the topic, it is all very nuts and most ignore it probably anyway. But at least with this approach you can have some securtiy for selling withing the USA with a managable amount of work and cost. And some might also consider it a good thing to pay the states so they can run police and schools, who knows :)
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Re: Sale Taxes with kickstarter campaigns?

Unread postby MagikFingerz » Mon Jul 03, 2017 6:38 pm  

If anything, I at least thought it was an interesting topic to read about.

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Re: Sale Taxes with kickstarter campaigns?

Unread postby ecNate » Wed Jul 05, 2017 9:20 am  

Generally speaking for the USA, a retailer only 'may be' required to collect state sales tax when sold to consumer in the same state as the operator. For example, in the past when ordering from Amazon I was expected to declare this when doing my income taxes and pay at that time for internet sales where tax was not collected. Now that Amazon has a major operation in my state they now must collect tax on my purchases, but I am still asked in the tax software to declare any internet or other purchases where sales tax was not collected. I assume there are exemptions for when tax does not need to be collected by certain retailers (for example possibly when it's not an actual retailer like Kickstarter?) as well. The main point is I don't believe you need to concern yourself with US sales tax if you are from another country, but my hunch is not at all for a KickStarter situation. The way you declare your profits is the bigger issue for you.
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Re: Sale Taxes with kickstarter campaigns?

Unread postby Cards Enthusiast » Wed Jul 05, 2017 10:16 am  

Even though I would love this to be true I am fairly certain everyone, in or outside USA, has to pay sales tax. And for almost all states you pay it when you have nexus there which is a question of the definition of each state. But most if not all states see any kind of available internet link as nexus and amazon and kickstarter do count as such. Here is just one state that says it a bit clearly than some others:http://dor.wa.gov/Content/GetAFormOrPublication/PublicationBySubject/TaxTopics/Crowdfunding.aspx
Do I have to collect and report sales tax when I use crowdfunding?
Yes, the project creator is required to collect sales tax on donations if you provide retail services (such as meals), digital products or tangible personal property (books, videos, copies of games, etc.) as rewards. You don’t have to collect sales tax on items exempt from sales tax (such as prepackaged food items).
We recommend you state, when appropriate, that all pledged amounts include sales tax. Otherwise, we will assume that the pledged amount does not include sales tax.

So if any kickstarter campaign ever sold an item in that state and didnt pay sales tax, such as the kickstarter blogger in this forum, he is risking to be sued for tax fraud when they find out. And even worse, there are a lot of states and I think most if not all (but 5) can sue you when u forgot to pay.

ecNate wrote:Generally speaking for the USA, a retailer only 'may be' required to collect state sales tax when sold to consumer in the same state as the operator. For example, in the past when ordering from Amazon I was expected to declare this when doing my income taxes and pay at that time for internet sales where tax was not collected. Now that Amazon has a major operation in my state they now must collect tax on my purchases, but I am still asked in the tax software to declare any internet or other purchases where sales tax was not collected. I assume there are exemptions for when tax does not need to be collected by certain retailers (for example possibly when it's not an actual retailer like Kickstarter?) as well. The main point is I don't believe you need to concern yourself with US sales tax if you are from another country, but my hunch is not at all for a KickStarter situation. The way you declare your profits is the bigger issue for you.
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Re: Sale Taxes with kickstarter campaigns?

Unread postby Cards Enthusiast » Wed Jul 05, 2017 4:29 pm  

As a german citizen I would love that. But this is not the case. When you have sales tax nexus in the US then you have to pay the taxes. And most states definition of nexus is when you use affiliate websites such as amazon or kickstarter. I still would consider a lawyer for all this stuff but I think the case is fairly certain.

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Re: Sale Taxes with kickstarter campaigns?

Unread postby Mike Ratledge » Wed Jul 05, 2017 9:19 pm  

In general, you must pay state sales tax for the state you live in - only for backers who live in the same state.

For you, the tax burden shifts to the buyer under the use tax.

As a practical matter, almost no one pays the use tax.
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Re: Sale Taxes with kickstarter campaigns?

Unread postby Cards Enthusiast » Thu Jul 06, 2017 3:09 am  

I would love it to be so but I rather hire a tax lawyer before risking my financial future. And you are right, it seems almost nobody is paying sales tax, but that doesn`t mean it is right.
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Re: Sale Taxes with kickstarter campaigns?

Unread postby Mike Ratledge » Thu Jul 06, 2017 8:25 am  

Cards Enthusiast wrote:And you are right, it seems almost nobody is paying sales tax, but that doesn`t mean it isy right.

Two different things, really. Sales tax is what vendors charge buyers, use tax is paid by the buyers directly to the state. Sales tax is required, although I have seen people argue that KS is not retail sales. That's true, but it doesn't escape the requirements for collecting sales tax. A state wants sales tax when money changes hands commercially. Pretty much sums it up from that perspective.

Now both are the same idea, of course. I pay use tax every year. I am one of the few.
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Re: Sale Taxes with kickstarter campaigns?

Unread postby Cards Enthusiast » Thu Jul 06, 2017 8:30 am  

So we agree that sales tax has to be paid by kickstarter campaigns. I misunderstood your first comment then. But regardless of what we think, every kickstarter campaign owner should consult a lawyer for this kind of thing especiallay since this year it seems there is a big change coming.

Mike Ratledge wrote:
Cards Enthusiast wrote:And you are right, it seems almost nobody is paying sales tax, but that doesn`t mean it isy right.

Two different things, really. Sales tax is what vendors charge buyers, use tax is paid by the buyers directly to the state. Sales tax is required, although I have seen people argue that KS is not retail sales. That's true, but it doesn't escape the requirements for collecting sales tax. A state wants sales tax when money changes hands commercially. Pretty much sums it up from that perspective.

Now both are the same idea, of course. I pay use tax every year. I am one of the few.
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