Katherine Keltner Laying the foundations for Dream Garden at Gateshead
What are your responsibilities as a visual artist to charge sales tax?
How do other artists handle this mathematical irritation throughout the year and, especially, come tax season? In Artwork Archive's series on taxes for artists, we’ll take a deep dive into how to apply sales taxes to your artwork sales and incorporate them into your year-end accounting.
First of all, let’s talk about what sales tax is and isn’t.
Sales tax in the United States is the tax applied to most purchases. Sales tax is why when you check out in a store (unless you live in Delaware, New Hampshire, Oregon, or Montana, the four states that don’t charge sales tax) you end up paying a percentage more than whatever the item was marked as on the tag.
Sales tax is set by the individual state so some elect to skip them or have a lower percentage while other states might have sales taxes as high as 7.25% (California in 2023). After the state has figured out its percentage, the county or city where you are selling goods may apply an additional percentage.
Sales tax is not the tax you pay to the IRS at the end of the year.
Those kinds of taxes are your income taxes, of which sales from your business are a percentage of the profits. You may see other percentages at the bottom of receipts such as a service surcharge or fee for sale of alcohol. These percentages placed on top of a sale go toward the individual business or in the case of controlled substances, the state where you run your business.
What's an example of a sales tax breakdown?
An example of sales tax: San Francisco’s tax rate for 2023 is broken down as 6% to California, .25% to San Francisco, 1% to the local neighborhood where your business is located, and 1.38% to the county district.
These numbers give a combined minimum tax sales tax of 8.63% on all applicable goods sold in the city. As a general rule, more densely populated areas have higher sales taxes because the municipality has greater expenses to consider when keeping up public works like roads and reservoirs.
Do artists need to charge sales tax?
Because sales tax is a percentage applied to a total, sometimes artists don’t want to charge it for fear that sales tax will discourage buyers who would be otherwise ready to purchase something.
However, it’s important to both charge and keep track of sales tax on your artwork sales because the IRS assumes that is what you have been doing when they tax you for your business profits at the end of the year. Not charging sales tax on the sales of physical goods is a form of tax fraud.
What type of art is taxable?
Generally, all physical art (painting, sculpture, etc) is taxable while about 50% of digital art is taxable, it depends on the state where you reside, according to TaxJar. How much you should charge in sales tax depends on where you sell the work— if you live and work in Columbus, Ohio, and make a sale from your studio there, you should charge the 7.5% rate for that city.
If you live in Columbus but travel to Chicago for an art fair, you are expected by the state of Illinois to register for a temporary sale tax permit and charge the 10.25% sales tax for that city. You can check out TaxJar’s compiled list of state-by-state in-person sales tax requirements here.
Of course, many art sales today happen online and it seems the IRS is still catching up to this reality despite the internet being around for about 30 years now. For some time now the standard has been to charge taxes only on in-state online orders and not charge taxes for anything going out of state. This is expected to change soon so it’s a good idea to get familiar.
Does sales tax for online art sales vary state by state?
The Balance has this list of state-by-state requirements for paying sales tax for online sales. In 2023, 46 states will require taxes of some kind for online sales but they set their own thresholds, meaning if you don’t do enough business in their state you don't have to pay their taxes.
You should be charging the recipient the sales tax for the location where they will be receiving the work so you may need to look up the address and determine by zip code the correct percentage. Under these new sale tax laws if you were shipping artwork from Washington D.C. to Prospect Heights, Brooklyn, NY (11218 zip code), you should charge 8.8% sales tax on the purchase. TaxJar’s free sales tax calculator is a great tool to use when calculating what to charge for online sales.
How can you keep track of sales tax for your income taxes?
Luckily many website platforms today including Artwork Archive have built-in tax calculators for you to add and track sales tax to the total cost of your goods sold. It’s never been easier to keep good records of the sales tax you’ve collected throughout the year.
Suzy Kopf is a multidisciplinary artist, college educator and arts writer. She has been an invited speaker on career development topics at the College Art Association, The CUE Art Foundation, Artists Thrive Conference, and the Maryland State Art Council, among others. She is a regular contributing writer for BmoreArt, as well as Baltimore Magazine, Johns Hopkins Magazine and the Baltimore Museum of Art and specializes in profiles on creatives, art business practice and exhibition reviews. Her work has been shown throughout the US and Canada and she has been the recipient of numerous residency fellowships including Kala, The Studios at Mass MoCA, Playa and VCCA.