Publishers Should Address State Tax Exposure Regarding the New Agency Pricing Model

As discussed in eBooknewser on April 16, and in TechFlash on April 15, Amazon is now allowing some publishers to set their own prices on e-books sold for the Kindle.  The agency pricing model creates new responsibilities for some publishers in connection with state tax.  Publishers with agency agreements with Apple and Sony, the other main players in the e-book market, also face state tax ramifications stemming from agency pricing agreements.

A publisher becomes a retail seller required to collect and remit sales and use tax on all sales of digital books in each state where digital books are taxable and in which the publisher has nexus.  At this point, of the 45 states and the District of Columbia that impose sales tax, only 24 states actually tax digital products.  But that number is likely to increase as states search for additional revenue.