This article discusses U.S. and international taxation law, which varies by country, state, province, territory, and municipality. The information here may not apply to your specific circumstances and is not legal advice.
Authors wear multiple hats, including writer, researcher, editor, and marketer. As e-commerce continues to expand, authors can add yet another identity to their figurative wardrobe: owner/operator of an online store.
Online stores allow authors to control the sale of their books far more than they can through traditional vendors. Authors can set prices without worrying about artificial pricing floors or ceilings.* They can also offer unique products not available at traditional vendors.
Authors generally earn higher royalties on sales through their own websites than those through traditional vendors. The details vary, depending on store platform (e.g., Payhip or WooCommerce), payment gateway (e.g., PayPal or Stripe), and product cost, but most authors receive 80-85% of the cover price of their goods.
But website stores present some challenges—most notably issues in delivering goods to purchasers and in handling taxation.
I conducted a survey in late June 2021, asking authors to report on their experiences running stores on their websites. All percentages noted below are derived from that survey. (Due to rounding, not all numbers add up to 100 percent.)
Building the store
There are many customizable e-commerce platforms designed to provide individualized stores on websites. Each integrates with an existing website to display goods, allow customers to order, and accept payment. Some systems also take care of fulfillment (delivering goods to buyers).
Popular e-commerce platforms include Payhip (used by 35% of survey respondents), WooCommerce (29%), and Shopify (12%). It is also possible to build a store entirely from scratch, using HTML code to create buttons and accepting payment through PayPal or Stripe.
Not all e-commerce platforms function on all website platforms. For example, WooCommerce is designed to work as a plugin on WordPress websites; it’s not available on other website platforms such as SquareSpace, Wix, or Weebly.
Some authors (including approximately 64% of the survey respondents) set up their stores themselves, adding the code to their existing website and optimizing it to best reflect their brands. Another 6% had their personal assistant set up their stores, while 30% hired a programmer or web admin to create the store.
Once a store is created, it needs to be maintained. Software requires occasional updates to run smoothly and to minimize the risk of hacking. New products (e.g., newly published books) must be added. Authors can run sales, including special prices for specific time periods. Eighty-two percent of survey respondents reported maintaining their own store or having their personal assistant maintain it. The remainder hired a programmer or web admin for at least some of the maintenance.
Stocking the store
Once a store is installed on a website, an author has a lot of leeway about what products to stock. Among survey respondents, 60% sell ebooks and 53% sell print books. Thirty percent sell audiobooks, 35% sell swag, and 6% sell membership in classes, seminars, or public appearances.
Owning a store allows an author to develop unique products only available at that store. For example, they can build unique boxed sets, including the first book in multiple series, books collected according to tropes, or books related to a specific holiday. Authors can also pair books with swag in unique packages.
Moreover, authors can provide a high level of “fan service,” offering books in their own stores prior to releasing those books through traditional vendors. Such early releases reward dedicated readers while simultaneously increasing the value of an author’s newsletter (because interested readers will click on links in that newsletter, further building ties to the author and increasing the deliverability of future newsletters).
When customers purchase electronic goods (e.g., ebooks, audiobooks, class memberships), they typically expect those products to be delivered immediately. The leader in electronic goods fulfillment is BookFunnel, which walks customers through the process of “sideloading” (adding new purchases to e-readers or computers, without the delivery apparatus of a traditional vendor). Sixty-five percent of survey respondents report using the service, which automates delivery of electronic files.
Fulfillment is somewhat more complicated for physical goods (e.g., print books, swag). Fifty-nine percent of survey respondents report that they or their personal assistant handle shipping of at least some physical goods. In addition, 18% of respondents rely on a print-on-demand store to deliver products. (Shipping directly from a print-on-demand store avoids paying twice for moving the same items.)
Many authors shy away from website stores because they are concerned about the tax implications of running an online business. Recent United States Supreme Court rulings have clarified that online store owners are obligated to collect and remit sales tax for all states where their customers reside. (This represents a change from the earlier rule, where owners only needed to remit sales tax in states where the owner had a business presence. In the United States, sales tax is managed on a state-by-state basis; there is no federal sales tax.)
Some states classify ebooks as “electronic products” that are not subject to sales tax. And most states further relieve the burden through “garage sale” laws, stating that it’s not necessary to remit sales tax on small or “de minimis” sales. (One of the last holdouts for a de minimis exception, Kansas, rectified the oversight with an exception that became effective on July 1, 2021.) Laws change frequently, though, and store owners should remain current on the requirements to collect and remit sales tax. An overview of U.S. laws on sales tax can be found at Tax Jar.
Store owners may also be liable to pay value-added tax (VAT) on sales made to residents of foreign countries. While some countries have exceptions that cover ebooks, others explicitly state that all sales of all goods, no matter how small, remain taxable.
Store platform Payhip, which is based in the United Kingdom, proudly handles collecting and remitting VAT for store owners. As of this writing, no other major store platform provides that service.
Store owners take a variety of actions regarding collecting and remitting taxes. For authors based in the United States, 79% of respondents accept customers from anywhere; the others limit their sales based on country. (All respondents based in other countries accept customers from everywhere.)
Store owners based in the United States exhibited a great deal of confusion when surveyed about taxes. Some know that they’re selling taxable items. Many aren’t aware that their goods might be taxable. Many rely on the de minimis exemptions (although most say they have not researched those exemptions specifically). Some rely on Payhip (although Payhip might not remit taxes to all tax authorities worldwide).
Overall cost to set up store
The cost of installing a web store varies widely. The store requires a website (usually the same as the author’s), which in turn requires hosting from a service like SiteGround, Bluehost, or GoDaddy.
The website must use a theme or template that is capable of supporting a web store. Many of those themes and templates are free, but paid themes and templates tend to provide a greater range of functions, a more specialized design that might stand out in a crowded field, a higher level of customer support, and more frequent updates. Popular themes include Storefront, Divi, and Astra.
Some store software is free (such as WooCommerce). Other store software—e.g., Payhip and Shopify—have tiers of pricing, providing different features at various price points. Most store software providers offer a free trial for users to experiment with the features for 14 days.
Finally, website stores generally rely on payment gateways such as PayPal or Stripe to accept customers’ payment for goods. Those gateways charge a transaction fee for every sale (e.g., $0.49), plus a percentage of the cost of the item sold (e.g., 2.49%).
Of course, no single author’s store is going to challenge the reach of the Amazon behemoth or other traditional vendors. Ninety-five percent of surveyed authors noted that their website stores were less profitable than any of their top three venues. (The remaining 5% were unwilling to answer the question.) While one author reported website sales equaling 10-24.99% of their total sales and another reported website sales of 5-9.99%, all other respondents who answered the question were equally divided between sales of less than 1% and sales of 1-4.99% of their total income.
The future of stores
Many respondents noted that their stores are not currently key income-generating pieces of their sales strategy; however, they are bulwarks against the harsh strategies and potential failure of traditional vendors. Several respondents called for authors to increase the training of their readers, helping potential customers become more comfortable with sideloading.
Website stores remain a tantalizing prospect for authors. In the short term, they offer increased income, with a huge potential as customers become receptive to buying outside the structure of traditional vendors.
At the same time, creating and maintaining a store (especially the international taxation issues associated with the operation of that store) are intimidating for many authors. While there are rumors of third-party sites offering the opportunity for authors to create self-branded stores with minimal fuss, those rumors are not yet public.
*While Amazon reserves the right to match prices to other vendors—including authors selling direct—they’re unlikely to discover pricing on most authors’ websites.
USA Today bestselling author Mindy Klasky’s most recent novel is the romantic comedy The C Word, the first volume in her Love in the Age of COVID series. Klasky learned to read when her parents shoved a book in her hands and told her she could travel anywhere through stories. As a writer, Klasky has traveled through various genres, including romantic comedy, contemporary romance, and traditional fantasy. In her spare time, she knits, quilts, and tries to tame her to-be-read shelf.