Buying an Ebook: In the real world

[HansTWN]

Originally Posted by Pardoz

The reason for geographic restriction's not a mystery: they exist because electronic book rights, in the vast majority of all book contracts, are an afterthought tossed into the stock contract. When electronic rights became an issue in the early 90s, boilerplate was added to standard contracts including electronic rights with paper rights. Since the standard in English-language paper publishing is to split rights trans-Atlantic (generally but not always US/Canada and UK/Commonwealth, with the odd exception like the one that made Raincoast Books a boatload of money when they realized nobody had picked up the Canadian rights to the Harry Potter books), electronic rights get split the same way.

For the current mess to be resolved, either contracts have to be changed (Magic 8-Ball says: "Outlook not so good") or the definition of 'location of sale' has to change.

In a nutshell - if I live in Poland, I fire up Opera (or Firefox or Internet Exploder), I log into Amazon-US, and I buy a paperback printed by a US publisher that only has rights to sell the book in the US, Amazon will happily sell it to me and put it in the mail. The sale is considered to have taken place in the US, in the warehouse where the book is stored. If I live in Poland, I fire up Opera (or Firefox or Internet Exploder), log into Amazon-US, and buy an electronic copy of the exact same edition of the same book from the same publisher from the Kindle store the sale is considered to have taken place...on my computer in Poland. As far as I know, there's absolutely no basis in law (and arguably very little basis in logic) for this assumption. There is, however, an argument based on brute force: "If you don't play by these rules, we (the publishers) will refuse to supply you with new product."

You didn't get it right 100%. The same publisher (US) would love to make the extra sale! The problem is that there are other publishers around the world who have the rights for selling to different countries. The US is the biggest market in the world. Competition is fiercest and prices are the lowest. Americans love deals, people in some other countries are less price sensitive. (If you don't believe that, look at the Irex 800 mess. It was offered in the US for 400. Now it is in Europe for 600 and people are still interested in buying!). Publishers can get a lot of volume there and can negotiate for better prices for themselves, thus being able to sell cheaper. A publisher that has the rights for Central Europe, for example, let us say Germany, Poland, the Czech Republic, etc., cannot expect to sell at a lot and will not have the same low cost the US publisher has. So it is really those publishers from your countries that do not want to let you buy in the US and would sue Amazon and others.

What would happen if regional restrictions were removed is that all customers who knew would buy online in the US. The market for those foreign publishers would be even smaller and the books would not get promoted in any country except the US.

A final problem is tax. US online sales have no tax. And you know how greedy European countries (in Germany I always feel that even small scale tax evasion is considered to be worse than murder) are when it comes to tax collection. In order to avoid WW III American online sales would have to set up a system of collecting and forwarding that 19% VAT to foreign governments. If you buy serious number of books online now your country may be losing out on tax money and you could actually be charged with tax evasion, have you considered that?

You could argue: "why not allow American websites to sell to customers from countries where nobody has an exclusive contractual right to sell the books in question"? That makes sense, but would be extremely complicated to carry out.

I hate these restrictions as much as the next guy. But it will take some time before this convoluted mess can be sorted out. Fortunately it is quite easy to work around these restrictions and if we all do it, falling sales in other countries will send a clear message to those responsible for the system.

[Pardoz]

Originally Posted by HansTWN

The same publisher (US) would love to make the extra sale!

Everything I've seen from online retailers is that the pressure to define location of sale for ebooks differently from location of sale for pbooks is coming from domestic, not foreign, publishers, and that they're using the threat of cutting off sellers who don't play by their rules to ram this through.

A final problem is tax.

IANAL, and I am especially not a tax lawyer, and tax laws will vary wildly from country to country, but my understanding on this (having once asked a Canadian tax lawyer about it) is that, generally speaking, if the tax wasn't collected at source it's your responsibility to go to your local tax office, declare your purchase of untaxed goods or services, and pay the appropriate tax. In the real world nobody actually does, and I suspect that if you walked into your local tax office to declare that you'd just bought a hundred Euro worth of electronic books from Amazon and would like to pay your VAT now, please, they'd look at you as if you had grown a second head, but that's my (layman's, incomplete, not necessarily applicable in your region, void where prohibited by law, for external use only, if rash continues consult a physician) take on it.

[spideog]

A final problem is tax.

Within the EU there are different VAT rate for each member state. Once an online retailer from one state sells over a certain value of goods per year to customers in another state then that retailer has to register for the second states VAT and collect it from the customer before passing that on to the foreign country.

Below that level then the VAT collected remains at, and goes to, the sellers government. I cannot remember what the level is but it's only in the small 10 of thousand Euros per year range, so the likes of Amazon.co.uk is easily selling above that level to pretty much every other EU state, or there is a local Amazon.co.XX that will make the sale instead.

[HansTWN]

Originally Posted by Pardoz

Everything I've seen from online retailers is that the pressure to define location of sale for ebooks differently from location of sale for pbooks is coming from domestic, not foreign, publishers, and that they're using the threat of cutting off sellers who don't play by their rules to ram this through.

Cheaper prices on pbooks are not really a concern for the two parties mentioned. Let us say you buy a pbook at Amazon and have it sent to Europe. First you would pay a lot on shipping, most probably more than making up for any price difference that might exist if the book was available in your country. Second the book could be taxed at the border, if it has exceeded a certain value. Which would leave you buying only those pbooks in the US that really are not available in your country. And there is no reason for anybody to object to that.

It is easy to trivialize the tax issue. But let us say 100,000 EU citizens spent 100 dollars each on US websites to buy ebooks. And then take 19% tax that is lost. The point is not that European countries want you to declare the books you bought on US websites. The point is that your governments want you to buy on European websites where the tax is automatically deducted! Or that there will be some future arrangement where Europeans could buy on US websites, but the websites would be responsible for forwarding the 19% to your tax office. Meaning you pay more, just like I pay less in Germany -- because I am no resident and don't need to pay VAT.

[Pardoz]

Originally Posted by HansTWN

Cheaper prices on pbooks are not really a concern for the two parties mentioned.

Right, which is why they never made a fuss about it when the legal point of sale was generally accepted to be the location of the seller - the volume of sales just wasn't large enough to worry about.

In some places there is actually legislation that defines the point of sale as the seller's location - Amazon US doesn't locate warehouses in certain US states because if they did, any items shipped from that warehouse would, by law, be subject to that state's sales tax, regardless of where they were shipped to.

It is easy to trivialize the tax issue.

I'm not trying to - to the best of my (very limited) knowledge, if tax is due and wasn't withheld by the seller, it's the buyer's legal responsibility to declare the purchase and pay the relevant tax. Your tax code may vary.

And yes, digital distribution of products (and services) is going to be an enormous minefield for tax law in the coming years - a colleague of mine in Poland delivers lectures on-line via videoconferencing to students in China who reimburse him via Paypal, which is linked to his UK bank account. He dodges the question of which of those three countries income tax is due in by not declaring the income...

[nikkers]

I just want to be able to buy a book now . In Australia theie is no decent Online stores with any sort ofdecent sized library. Fictionwises micropay accs make it easy to bypass the Geo restrictions except for Random House's new wrinkle.

[Ea]

Originally Posted by spideog

Below that level then the VAT collected remains at, and goes to, the sellers government. I cannot remember what the level is but it's only in the small 10 of thousand Euros per year range, so the likes of Amazon.co.uk is easily selling above that level to pretty much every other EU state, or there is a local Amazon.co.XX that will make the sale instead.

The number I remember (from 5-6 years ago) was roughly 180000 Danish Kroner (abt. €24500). So far, the only online shop I've seen that collect VAT for the individual EU countries is amazon.co.uk - which is why I tend to use Amazon UK mostly for finding cheaper market place sellers

[spideog]

Yeah, the €20'ish thousands was the kind of number I was vaguely remembering the threshold being. I did manage to get some things totally VAT free from Amazon many, many years ago when they had only just set up the .co.uk and with them shipping to me in Ireland I managed to avoid all those charges, I also seem to remember the shipping being pretty cheap then as well.

I order quite a bit of sports gear online as well from UK stores and the prices they charge change to reflect the destination VAT rates once you select where you live. There is also some sellers in the Channel Islands, which are outside of the EU but within the UK or some variation on that, where you can avoid paying VAT on their products as well. Just depends on if the parcel gets spotted coming into your country and then customs invent some inflated VAT rate to charge you if they think it is over €25 worth of product.

[Ea]

Originally Posted by spideog

... Just depends on if the parcel gets spotted coming into your country and then customs invent some inflated VAT rate to charge you if they think it is over €25 worth of product.

That's my main reason to shop within EU - the postal service has gotten really good at spotting this, and they add 125 DKK (£13-14) on top as a fee. So unless it's something expensive where I still save a lot, there's no reason to shop outside EU.