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Old 05-02-2010, 03:54 PM   #1
M T McGuire
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Question Does anyone know anything about Witholding tax?

Hello there,

I feel very cheeky asking this having only just arrived and (mostly) lurked here for couple of weeks but you guys seem clued up and sound like the kind of people who might be able to help me with some advice.

I have written a book. I'm a UK citizen and originally I was going to publish it as an e-book on Smashwords - a site based in the US which sells all round the world. If I do this on another self-publishing site, LuLu, with a British ISBN, I can avoid having to pay any tax in the US.

This is good because what happens is the IRS creams off 30% of your earnings and sits on it for months. To get it back you have to fill in lots of forms and send them away to the IRS (with precious things like your passport which, if the IRS are anything like the immigration department, you can rest assured you will NEVER see again - they had my sister in-laws for five years and my husband's birth certificate was never seen again). Eventually you get an ITIN number and attach it to another form, which, after a bit of to-ing and fro-ing with the agent who is selling your product, you then have to send to the IRS with a US tax return to get a rebate of the tax you've paid (god knows filing one tax return is bad enough but two... please no).

Has anyone else encountered this? There doesn't seem to be a standard, LuLu charge a bomb to e-publish but if you have a British ISBN there's no witholding, Smashwords take a fair commission but as yet, there's no indication whether having a British ISBN on there would sidestep the witholding issue...

Does anyone know if there are set rules, for example, why is a British ISBN going to exempt me on LuLu but, it would seem, not Smashwords?

Finally, does anyong know of any UK based equivilents of Smashwords I could use instead. I have so little time, I need to spend it writing and selling my book, not trying to sort out a monumental tax headache...

Cheers

MTM

Last edited by M T McGuire; 05-02-2010 at 03:56 PM. Reason: rubbish, nonsensical grammar
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Old 05-02-2010, 06:55 PM   #2
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The only thing I know for certain is that in the US if you are self-employed, you pay both your own and the employer's part of Social Security taxes and Medi-Care taxes.
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Old 05-02-2010, 07:49 PM   #3
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If you sign up for a Smashwords account, put in your country as the UK, and then have a look at the Payee page - it'll tell you how much the IRS withholds if you do have all the paperwork filled out.

You may find that Lulu will change its tune if the IRS pounce on it. They may be taking the angle that a foreign ISBN indicates a distribution agreement, not an employment situation *shrug* The IRS apparently has no specific guidance in the ecommerce field, just demands to pay up!

It's a pain in the neck, I'll grant, but there's the 'joy' of doing business in the US. Sooner or later, if we act as our own agents, we're going to run into these problems. Amazon will (if it doesn't already) have the same problems, I'd think. The IRS MIGHT sometime make it clear what the rules are...
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Old 05-02-2010, 08:22 PM   #4
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Hasn't Amazon gone international now with their DTP service? I was under the impression that anybody outside of the US who used the service would be sent cheques in USD's and they would have to sort out their own tax from thereon in.
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Old 05-03-2010, 02:35 AM   #5
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Originally Posted by Dusty Bottoms View Post
Hasn't Amazon gone international now with their DTP service? I was under the impression that anybody outside of the US who used the service would be sent cheques in USD's and they would have to sort out their own tax from thereon in.
That's the way Smashwords used to do it too.

To my understanding, the IRS is cracking down on this form of payment (not withholding tax from people without tax info), because it allows people to avoid paying tax that the IRS is entitled to. So Amazon may need to change its methods too *shrug*
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Old 05-04-2010, 07:17 AM   #6
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Old 05-04-2010, 07:42 AM   #7
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Hya MTM: I think you'll find that the UK has treaty status with the IRS which means you qualify for exemption from US tax. The problem is that you've got to jump through hoops like a performing circus poodle to establish this.

My own wee publishing house was UK-based for the first ten years but we re-registered in Canada earlier this year. And (though the timing is purely coincidental, I believe) that's when we first came across several US retailers -- Smashwords was by no means the first -- saying that they would have to withold 30% for the IRS until we'd completed all the paperwork necessary for exemption.

We've been working on the red tape now for three months. For us, with a fairly large catalogue and twelve to twenty new releases each year, it's necessary and ultimately worthwhile (I hope) to take the trouble. But if I was an independent author based outside the US and with one or just a handful of titles out there, I think I'd seriously think twice.

When I was writing solo from France in the eighties and nineties, I had the choice of paying French taxes on 90% of all income from abroad (mostly US, UK and Australian publisher clients) or opting for tax at source. At the time, there was little benefit in being taxed locally, so I went for tax at source to save all the messing around.

Currently, because there's no treaty between Canada and China, we have not even attempted to challenge the 14% government tax we must pay on income from the Chinese mainland.

Good luck. Neil
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Old 05-04-2010, 09:58 AM   #8
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I know one thing about taxes: I don't like them.
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Old 05-04-2010, 09:59 AM   #9
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So it seems that for the UK author there is no significant advantage to the self-publishing route on a monetary basis. What a downer for anybody pursuing that route
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Old 05-04-2010, 11:26 AM   #10
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So it seems that for the UK author there is no significant advantage to the self-publishing route on a monetary basis. What a downer for anybody pursuing that route
Your boy George Harrison summed up the situation well with the song "Taxman" by the Beatles. Sorry, ol' fellow. We here across the pond are doing the same stupid thing now.
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Old 05-04-2010, 11:32 AM   #11
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Your boy George Harrison summed up the situation well with the song "Taxman" by the Beatles. Sorry, ol' fellow. We here across the pond are doing the same stupid thing now.
After UK tax and US tax and whatever else tax that is on top of it all, plus having to market and drive sales to your own work, create covers, proofing and editing etc, the UK author is probably going to get more out of the 5-10% sales of traditional publishing. Damn, I never thought I'd say that.
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Old 05-04-2010, 12:13 PM   #12
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Old 05-04-2010, 12:18 PM   #13
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Unless some enterprising publisher that already had the paperwork sorted out was prepared to act as a middle-man in exchange for a percentage, I guess...
Which is exactly what the trad publishers are doing already. As European writers we're back to square one.
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Old 05-04-2010, 12:29 PM   #14
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Which is exactly what the trad publishers are doing already. As European writers we're back to square one.
You're welcome to come over here!
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Old 05-04-2010, 12:57 PM   #15
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You're welcome to come over here!
I'll stick to writing about the place ta
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