E-books have revolutionized access to literature, information, and educational resources. However, as with any new market product, e-books are subject to taxation. This article explains how to sell e-books without getting in trouble with tax authorities.

Defining E-Books and Audiobooks

From a legal perspective, an e-book is a book in digital form. It can be a digitized version of a physical book or created directly as a digital product. An essential characteristic of an e-book is that it cannot be edited and is intended for reading on devices like tablets, laptops, smartphones, desktops, or e-book readers. E-books come in various formats, such as text files, PDFs, or images, often serving as electronic versions of printed books.

In contrast, audiobooks are not equivalent to e-books regarding VAT application in all countries. For example, in the UK, audiobooks are subject to the standard VAT rate of 20%, while physical books and e-books are zero-rated for VAT. This distinction arises because audiobooks involve narration and are classified as audio content, not digital publications, placing them in a different tax category.

Benefits and Rise of E-Books

E-books offer numerous benefits, including portability, affordability, and accessibility. E-book readers are lightweight and portable, designed specifically for reading digital books. The absence of paper makes e-books more affordable, and they can be transferred digitally or downloaded instantly, enhancing accessibility.

Due to these advantages, e-books began outperforming regular printed books in terms of numbers by the early 2010s, especially in developed countries. This surge in popularity has driven the digital transformation in how we consume written content, making e-books a dominant force in the literary world.

E-Book Taxation

VAT and E-Books in Europe

Since the European Council allowed member states to apply a reduced VAT rate to electronic publications, significant reforms have occurred in VAT rates for e-books. After October 2018, many EU countries updated their VAT rates for e-publications, with numerous countries reducing the levy on e-books. In some European countries, digital books (e-books) are treated the same as physical books for tax purposes. The current VAT rates for e-books and audiobooks in various EU countries are as follows:

Non-EU Countries

Non-EU countries have also adjusted VAT rates for e-books. For instance, Switzerland imposes a VAT rate of 2.6% on e-books instead of the standard 8.1%. Moldova has synchronized the VAT rate on electronic books and periodicals with those on printed equivalents.

In the UK, e-books are exempt from VAT. This zero rate applies to electronic versions of books already zero-rated under UK law. However, this exemption does not extend to audiobooks, which are subject to VAT at the standard rate of 20%.

E-Book Taxation in the US

The United States does not have a federal sales tax; each state has its own approach to taxing e-books. E-books are subject to sales tax in 32 states and exempt in 18.

How to Sell E-Books and Manage VAT/Sales Tax

Selling e-books can be complex due to varying tax rates across different countries and states. Many e-book authors and publishers opt to distribute via large platforms like Amazon, which offer sales tax management. However, these platforms often charge high commissions, sometimes up to 65%, and may include delivery fees for digital products.

Alternative Solution: 1D3 Digitech

Another option is selling with a merchant of record like 1D3 DIGITECH. As a global distributor of digital products, 1D3 handles payments, sales tax, and buyer support. The commission is only 3%, and global Sales Tax (VAT/GST/CT) compliance is guaranteed, with no delivery or any other hidden fees. Additionally, 1D3 can provide a custom WebStore to kick-start your sales.