Should your Christian band be collecting and paying sales tax on the merchandise you sell?
Most often, the answer is “Yes.”
Sales taxes are not controlled by the Federal government, they are governed by states. So, each state gets to set their own rules. For bands that travel from state to state and sell merchandise, sales taxes can be a real headache. Many bands, both Christian and secular, simply sell their merchandise under the table, without collecting or paying sales taxes. This is not legal. There are only 5 states which do not have sales taxes: Oregon, Alaska, Delaware, Montana, and New Hampshire.
Some Christian bands try to get around the system by saying that they do not “sell” merchandise, they take offerings and give gifts in return. This only truly works (is legal) when you are actually willing to give away your merchandise for a donation without specifying the donation amount. Can you afford to give t-shirts away for a penny donation? If not, you are actually selling merchandise and should collect and pay sales taxes.
Most states require anyone who is selling merchandise in their state to get a vendors license before starting to collect sales tax. Most often, there are two kinds of vendors’ licenses available: one for brick and mortar stores and another called a transient license, which is for retail sales made in a variety of locations. Small businesses such as artists and flea market vendors also use this type of license. The transient vendors’ license is what bands need as it allows sales tax to be collected anywhere within the state. Most states require an application form and an application fee, which varies greatly between states. Some states also offer a temporary vendors license, which could be used for a one or two day event in a state that you will not perform in the rest of the year. This temporary license is best for events such as festivals. It usually does not have an application fee.
The amount of sales tax you must collect and how often you must pay them back to the state also varies widely between states. In addition to state sales taxes, most states allow counties and some cities to add additional sales tax. These additional taxes are almost always collected by the state at same the time as the state taxes. Search online for your states sales tax requirements.
Sales taxes are based on the location of the sale,
not the home office of your band.
So your band, even if it is a hobby, will probably need a vendors license for each state that you perform in. Start by obtaining a license from the state in which you reside because that is where virtually all of the bands first gigs will be. As the band expands check with each new state you will perform and obtain whichever licenses they require.
Collecting and paying the appropriate sales tax is one more way to submit to our government. This submission, paying taxes where taxes are due, brings us into greater obedience of all the things God has asked us to do. Our obedience clears the way for God to grant us more favor and blessings.
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