How does sales tax work for Reiki?

Christian Stone | Standing Stones Healing Co.

Can you explain how do you deal with taxes if you create an online store on your website? I offer Reiki sessions, but want to sell crystals, too. What would I do at tax time? I thought about Etsy, but a lot of YouTubers and marketing gurus encourage selling from your own websites, which is a great idea, but no one ever explains how we would deal with taxes. Thank you for your help!

Yes, selling products in our Reiki business can be a serious challenge when it comes to taxes. When you use a platform like Etsy, they serve as the Merchant of Record and handle the taxes, including sales tax and VAT (value added tax imposed in certain countries). They collect it and pay it on your behalf because, as a larger company and platform, they're considered the merchant.

But when you sell on your own online store, such as through Stripe, you need to charge and remit taxes yourself. If you are US-based, depending on the volume of sales you do (number and amount), you may only have to worry about this if you are selling to customers within your own state (depending on your state). So if you're selling crystals from your website, you may not have to worry about sales tax at all for customers in other states unless/until you have a certain number of transactions/purchases in each state and/or a certain dollar amount in sales in a specific state. In your own state, you will generally need to collect and pay sales tax on all sales, including your very first crystal sale. Different states have different thresholds, though, so knowing what those are in terms of number of sales and dollar amount of sales is important.

For US-based Reiki businesses selling to other countries, such as the EU, VAT, which is a certain kind of sales tax, also depends on your sales amounts. Here's where it gets a little tricky: the EU is considered one entity, or one "state," so once you hit, 10,000 Euros in sales per year in any/all member countries, you must charge and remit VAT for your very next sale, no matter which member country the customer is in.

Let's say you sell 9,999 Euros in crystals to a customer in Germany and your next sale is to someone in France...you need to charge and pay VAT to the EU starting with that sale. Or let's say you have 4 customers in 4 different EU countries: France, Germany, Spain, Ireland, and those sales all total 9,999. Your very next sale to an EU customer, no matter which country the customer lives in, means you need to charge and send VAT payment to the EU. The good news is that most US-based Reiki business owners are not selling more than 9,999 Euros per year of taxable products to EU countries, so most Reiki business owners don't have to worry about VAT at all.

Unfortunately, there is no VAT threshold for the UK, and US sellers must charge and remit VAT with the very first sale, no matter the amount. That means that if you sell a single low cost crystal to a UK customer...let's say a piece of selenite for $3, you have to register in the UK to collect VAT, charge the customer VAT, and pay it to the UK. This is a challenging and costly process that involves either registering yourself or going through a fiscal representative based in the UK. What's even more unfair about this is that UK-based companies have a rather high volume of sales (95,000 pounds sterling) before they need to charge and remit VAT.

Because of these challenges, you can either choose not to sell your crystals to non-US customers or to sell through a platform that serves as the Merchant of Record, like an Etsy, Amazon, or etc. Either way, it's important to stay on top of, knowledgeable about, and in compliance with all tax laws...including knowing whether or not something we're selling (Reiki sessions, crystals, etc.) is subject to sales tax.

Of course, this information is provided to the best of my knowledge for informational purposes only, is not advice, and may contain errors and omissions, for which I cannot be held liable. Please always consult your own accounting and tax professional. 

But I explain this in more depth as well as explain how federal taxes work for US-based Reiki businesses in the Reiki Business Tax Class, which helps to clear up the confusion and overwhelm about taxes and makes you your accountant or tax preparer's favorite client! Yes, even if something isn't subject to sales tax or VAT, you'll most likely still need to pay federal income tax on it, so please make sure you're following the law!