VitalSource Sales Tax

VitalSource Sales Tax

In light of changes to state sales tax regulations and business growth in recent years, VitalSource Technologies (VitalSource) has been evaluating its sales tax compliance procedures. As of January 1, 2021, VitalSource will be registered for sales tax collection and reporting in every US state with a sales tax. Please see the frequently asked questions below.

VitalSource Sales Tax FAQ

 

What is a sales tax exemption?

A sales tax exemption takes the form of either a resale exemption documented by a resale certificate or an exempt entity certificate (schools, government entities, nonprofits, etc.) documented by a statement or form from the state in which an organization is exempt.

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What is a resale certificate?

A resale certificate is a legal document in which purchasers declare they are making purchases from VitalSource for resale.  Customers claiming an exemption based on resale must provide a properly completed resale certificate for all states in which they are licensed as a reseller.

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What if I am claiming an exemption based on my entity status (governmental, educational, charitable, or nonprofit organization)? 

If you are claiming an exemption based on being an exempt entity, you will need to provide VitalSource with the documentation issued to you by the state(s) documenting your exemption. Most states require an exempt organization to register in the state before an organization can claim a sales tax exemption.

Documentation required for sales tax exemption based on entity status varies by state. If you are an exempt entity, VitalSource will review your submitted documentation and notify you if it is not acceptable for tax exemption.

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Does a content supplier need to apply for this certification in every state? 

 That is dependent upon the facts and circumstances of the specific supplier and its needs. Each content supplier will need to review its presence and activity in the states in which it is selling vs. tax law. Generally, VitalSource will apply sales tax based on either the VitalSource customers BILL TO state or the state in which the content is being used.  The sourcing decision is based on state sales tax law, the type of product, and the information known by VitalSource about the customer.

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We have a 501(c)3 letter from the IRS. Does that exempt us from sales tax?

Not necessarily.  The 501(c)3 is an exemption from federal income tax.  Most states will require that an exempt entity apply for the state sales tax exemption.

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How does US sales tax affect me?

Sales tax is a transaction-based tax charged upon the sale of most products in 46 US states. Sales tax is a state tax, not a federal government tax, and as a result, it is different in each state.  Sales tax regulations vary greatly by state.  For example, many states will apply sales tax to digital goods and software, but not all.  Thus, the decision to apply sales tax is based upon the state, type of product, and the status of the purchaser (if there is a valid exemption on file or not). 

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I’m not in the US. Is this applicable to me?

Yes, it is applicable if you place an order through your VitalSource account to have the product delivered to or used at a location within the United States.

  1. Which states do not apply sales tax to digital content and software?
  2. Based upon the best information available to VitalSource in August 2020, the following states do not apply sales tax to digital content and software.

Delaware, Montana, New Hampshire, Oregon, California, Florida, Georgia, Illinois, Kansas, Maryland, Michigan, Missouri, North Dakota, Nevada, Oklahoma, and Virginia

Note: The states not listed above may apply sales tax to either or both digital content and software.

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What is the deadline to have all tax documentation submitted to VitalSource to avoid being charged sales tax on January 1, 2021?

All tax documents should be submitted by November 15, 2020

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In which states will VitalSource be required to charge sales tax (if tax exemption documentation is not provided and the product is taxable in the specific state)?

Alabama, Arizona, Arkansas, California, Colorado, Connecticut, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming

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What do I need to send to VitalSource to be exempt from paying sales tax?

You will need to submit updated sales tax exemption documentation. You may be exempt from paying sales tax if you are purchasing the products and services for resale or if you are an exempt entity (e.g., a governmental, educational, charitable, or nonprofit organization).  If you have an exemption or resale certificate and have not provided it to VitalSource or if you are unsure whether or not it has been provided, please send an email to bulk.orders@vitalsource.com with your account name and number if available.

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What happens if I do not submit updated sales tax documentation?

Without updated sales tax exemption documentation, sales tax will be collected on future orders in the states where VitalSource is obligated based on state sales tax regulations.

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Can I get a refund for any taxes paid before I submit my tax exemption documentation?

No. VitalSource is obligated to collect taxes on all applicable items until tax exemption paperwork is on file. To avoid paying unnecessary taxes, make sure you submit your paperwork by November 15, 2020.

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Can I mail or fax a copy of my tax exemption certificate to my VitalSource rep?

No. To ensure you have the correct paperwork for all states in which you are eligible, we highly recommend submitting your exemption documentation by email to bulk.orders@vitalsource.com. You may also request that VitalSource send you a link to a software site that will walk you through the documentation needed for a sales tax exemption. 

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Where can I find out more about tax exemptions?

For more information on tax exemptions and whether or not you are eligible, consult your tax advisor or the Department of Revenue for the state(s) in the US in which you conduct business.

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