This thread is for questions related to the US Author/Affiliate/Service Provider changes we’ve just announced. We’ll be providing batches of answers every few days.
To make sure everyone can follow the discussion and we don’t miss something important, please:
- Carefully read Collis’ blog post and all help center articles before jumping in with a new question
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For questions related to non-US Author/Affiliate/Service Provider changes, please go here.
[READ ME!] Q&A from the forums:
Tuesday, October 20, 2015
Wednesday, October 21, 2015 #1
Wednesday, October 21, 2015 #2
Thursday, October 22, 2015
Wednesday, October 28, 2015
Friday, October 30, 2015
Thursday, November 5, 2015
If you guys are issuing 1099-MISC to U.S. authors of their gross sales, then will invoices be changed back so it’s Envato Invoicing the buyer and not the author? Currently the way invoices are setup aren’t we technically independent contractors of the buyer (70%) and Envato is our independent contractor (30%)?
"Starting with the US financial year 2016, we will issue Form 1099-MISC
forms to report your total gross sales (excluding our buyer fees),
affiliate income and Envato Studio gross sales. You’ll get a form at the
end of 2016 which you can use to file your income tax return. "
Guess we’ll have to send Envato a 1099 for their fees, since they are taxing us for our “gross sales”. How about excluding your fees Envato? Why should I pay taxes on what the money you make?
Now I fully understand why Envato switched to a model where the author sells the item directly to the buyer: the US tax is paid by the author, not Envato.
I just have no word for this, I’m disgusted.
@TopStudio - I think Envato is saying we should be claiming the 30% cut as a business expense. Am I right?
Ultimately the changes shouldn’t matter because you should be paying U.S. taxes already (I should hope so!). You should still be paying the same % after Envato makes the change. But it’s important that Envato is declaring the amount of money that is withdrawn to the user not the gross sales.
I think they are opening a can of worms. Yes we should consider that a business expense. Except we have no receipt of us paying anything!!! There is no good reason to send us a 1099 for gross reciepts, when we never receive 100% of the gross. They will get thousands of 1099’s from US authors. But maybe they figured we wouldn’t bother, so like TopStudio said. let the author pay Envato’s taxes! They need to get this figured out, because I think this could be many folks’ last straw. Every decision they make is what’s best for them, not the author.
Not to mention, why would I give my social security number to a company who can’t even keep hackers from taking down their site on a weekly basis?
They opened the can of worms over a year ago - it was going to roll out in 2015 but we got a grace year while they worked out the details. I whined quite a bit about it on the forums then and didn’t get any responses, so I won’t go into complain-y mode now.
The main points are (unless I’m mistaken):
- Yes, you should already have been paying taxes. Sending Envato your SSN / W-9 to get everything tracked properly is actually a good thing.
- The bad thing - Envato is going to be reporting the entire amount of the sale minus the buyer’s fee, so that exclusive authors will have to write off 10% of the sale, and non-exclusives like me will have to write off 44% (or 8% more than I actually make :)), based on some documentation (which would really be great to see an example of, BTW - anybody know if there’s one out there)?
- After all this time, it’s doubtful that Envato will change their minds about this.
- Anyone who is reporting their Envato income as hobby income is pretty much screwed. So if you’re in that category, please read about the tax changes very carefully. Likely reporting this way will not be an option in 2016.
Why are you acting as though Envato is somehow getting off without having to pay their own taxes? And furthermore that authors should be exempt from paying taxes? What is it with all of these entitled people everywhere that think everything should be free? Envato provides an international forum for people like us to sell products to customers, intenationally. If you don’t like it, create your own.
What Envato is doing seems like a step in the right direction. I just don’t understand the full details of how it’s going to work because it seems a bit contradictory with the recent Invoice edits. But I am sure it will all be figured out nicely for us before January
Is it safe to assume Envato will be collecting state sales tax as well for U.S buyers located in states that collect digital goods sales tax?
I think TopStudio was referring to having to pay taxes for the percentage of money that he/she never received from Envato. For myself, for every $100 in sales I make in 2016, I will receive $36 from Envato, but Envato will report $80 to the IRS, putting me in a position of defending that $44 write off to the IRS based on some (as yet undetermined?) document from Envato.
I’m not a tax attorney, but one I talked to about this a year ago thought it sounded pretty sketchy. For all I know this is common practice in some circles, but I’ve never experienced this kind of reporting either doing freelance or on many other US based stock marketplaces. It’s going to cause complications for a lot of authors in the spring of 2017, and again, will (I believe) prevent authors from simple reporting of hobby income.
So I don’t think it’s about entitlement as much as a justified frustration at some unusual tax reporting on Envato’s end.
EDIT - Whoops, I think I’m getting whiny again. Time for me to shut up and write some more music.
Okay, that makes sense. Thanks for the explanation.
No worries! And hopefully if I messed anything up somebody from Envato will clarify.
And I know that I wasn’t going to post anymore, but whilst putting down what ended up being a mediocre piano track I started wondering - if technically I’m getting paid $80 for my $100 and then paying Envato $44 for being an author, and I subsequently write off the $44 so that I’m not paying taxes on it, then who is paying taxes on that amount? I assume Envato since that was the amount I “paid” them - but then why are we going through this rigamorale in the first place?
Okay, now I’m done.
Hi all, here’s the first round of Q&A. We’ll collect new questions as they come in and aim to post another batch of answers in the next day or so. Thanks!
Although the buyer is paying the author (the Item Price), a 1099-MISC for those sales is issued by Envato as the platform operator. For authors using PayPal this will replace the 1099-K issued by PayPal. For accuracy, I’ll give two example breakdowns:
Say there is a WordPress theme up for sale at $100, which includes a $20 Buyer Fee from Envato, and an $80 Item Price from the author. Provided a completed Form W-9 has been received, the author will get a 1099 at the end of the year listing the $80 Sale. They will also have our author fee invoice (which for an exclusive elite author would be for $10).
Similarly, say you are selling a Font on GraphicRiver. Because the category is an author-driven-pricing one, you could choose the Item Price to be, say, $50. Envato’s buyer fee in that category is fixed at $2, so the List Price would be $52. The 1099 would show the sales at the author’s Item Price ($50 in this example).
For US authors, tax is only applied to gross sales in the event that you don’t complete a W-9 form (in which case it is backup withholding tax).
Assuming authors complete the W-9 form, then you would be working with your tax advisor to calculate your income tax with no change.
Authors should continue to manage their sales tax in relevant states, we have a help center article on this subject.
lol, of course we get your sarcasm
(post withdrawn by author, will be automatically deleted in 24 hours unless flagged)
Will Payoneer and Skrill stay as options for money withdraw? I saw you only mentioned Paypal and bank account.
Interesting news. I figured this would happen some day, but didn’t think it would be so soon.
How would one go about seeing what information is already submitted? The tax info section of my profile is reading “You successfully submitted your tax information on 29 Dec 2014 AEDT”.
Will this information ever be downloadable through our profile, so we have access to the records? Or should we simply resubmit our W-9 if there comes a time where changes need to be made?
Guys, as you are US person, and you have filled W-9. How much envato will deduct from you?
They says they will deduct 28% if you didn’t submit W-9. But they did’t mention how much if given that form.
1.Who will pay the tax? You or Envato?
2. How much % ?
3. Are you able to deduct your expenses?
@WPExplorer @BarBeeCues @jhunger @andregaskins
Like I say, we will have to send Envato a 1099 for the “author fee” if it’s over $600. Why would you send us as 1099 that includes the author fee? That’s Envato’s income, not ours. I really don’t see how it’s legal to send a 1099 to authors for income that they never made (the author fee). Out of the $100 item price (if you are a non-ex author) you should get a 1099 for $36, not $80. If you sell $3000 worth of total item price, you will get a 1099 for $2400 instead of what you really made, $1080.