What @SpaceStockFootage mentioned earlier in the thread was referring to withholding tax. Withholding tax should not include the buyer fee, but will include the author fee. Per the Envato Help Center:
Backup withholding is 28% of the total value of your sales (the total of item prices, exclusive of any buyer or handling fees we charge the buyer, but inclusive of our author fees to you).
Ok, edit, I just re-read what he said and he never mentioned that withholding tax will include buyer fee.
But my issue in understanding the logic here, is that in my head, and in most of Europes head, then Author fee should be excluded just like the buyer fee? What exactly is different between the two? They are both expenses.
If youâre on about this post I madeâŚ
Unfortunately, the tax in your example would be $4.08 rather than $2.55. Itâs calculated on the item price, not your cut after the author fee has been deducted from the item price.
⌠thatâs correct. The item price is the total price of the item after buyerâs fees have been deducted. The total price that is paid by the buyer is classed as the list price.
Thats exactly the post iâm on about. And I really donât get how buyer fees (An expense) is exluded, but the author fees (An expense for the author) is not?
No idea. Youâd have to ask the IRS. I just explain the rules, I donât know why they exist! However, if I had to guess⌠the buyers fee is between the buyer and Envato, the author doesnât enter into that transaction at all. Whether youâre writing stuff off or not, or offsetting this that and the other⌠the buyers fee doesnât come into it as it;s not an income or an expense when it comes to the authors.
Taxing you on something that you should be able to write off is one thing, taxing you on something that you 100% wonât be able to write off, is another!
Yeah, itâs certainly hard to figure out the difference between the current system vs the old commission system.
But I donât think anyone here is a tax professional. Envato surely had tax professionals on board when they decided to come up with the current model for fees, though.
In the end, itâs just a little more confusing, but you donât pay any more taxes than you have to, because expenses are expenses.
So how exactly, would you get taxes back on the author fees?
Edit: And technically @SpaceStockFootage, the transaction of the buyer fees is an expense for the author, as itâs deducted from your total sales amount, hence, the authors are covering the transaction fees before Envato takes their cut, which is even more unfair, if anything, they should take their cut of the total amount, so the transaction fees are split, not put it all on the authors.
Edit II: Nvm, getting tired, 5 AM, math is way off there 
Deducting the transaction fees before Envato takes their cut does exactly what I think they should, split the expenses between the author and Envato.
Not quite, the buyers fee is added to the item price⌠your total sales amount is the item price. As for getting the taxes back, you canât. But what you can do is add them as an expense when completing your tax return so that they donât contribute to your taxable income.
Juck! Iâm more confused and got more questions on the US tax system now then when I started So iâm just gonna give up trying to understand xD
Thanks for the help / answers.
We have here two different types of income taxes, one is the personal income tax and the other is the source income tax ( withholding tax ). The personal income tax you pay in your country on your gross income deducted by all permitted expenses and the source income tax you have to pay in the country where you have made the income at the source, for this form of income tax no deduction are usually allowed.
Most countries in the world takes source income tax on payments/dividents to foreign persons, so does the USA and also Norway. As far as I know Norway takes actual 25% of the gross income, so if Envato decide to open a business in Norway then all non-norwegian authors have to pay the norwegian withholding tax on sales to norwegian buyers.
@Sealord Well, the 25% is what we call MVA or VAT in English, and wouldnât be applicable for Envato if they opened up in Norway, for that simple reason that Envato isnât selling anything, the authors are.
Norway is different then the US (From what I read), a company like Envato that sells items on behalf of others, would never in any way, handle the taxes for the authors, it would be 100% the authors responsibility to do their taxes correctly, and Envato would solely focus on getting their author fee and they themself, pay taxes solely on that.
Envato is nothing more then an auction site or buy / sell site [Used or new], in other words, they are identical to Amazon, eBay and similar sites, just different products.
I do not mean the VAT but the withholding tax on dividend to foreign shareholders or on payments to foreign persons, I donât know the actual rate in Norway on this forms of payments or if there are withholding taxes for interests or royalties.
Envato is not selling items on behalf of others, well not on the normal marketplaces like Graphicriver, Themeforest,⌠the authors sell them, thatâs why the authors have to pay the source income tax in the USA because they made the income at the USA source. Envato is here only an intermediate entity, which is required by law to withheld the tax.
On the other marketplace âEnvato Elementsâ, there Envato is selling the items and bought them before from the authors. Non-australian authors on Envato Elements had to pay the Australian Withholding Tax because they had earnings on an australian source.
I donât follow the logic here, why is it USA based? Because Envatoâs servers are in the US? Is Envato a US company? And if so, why would it matter when, as you say, Envato doesnât sell anything, the author does, and most authors create the content in their own country and distribute it trough the open source, world-wide-web that no country owns or can claim ownership over, so what exactly (Just so I get it correctly), is making Envato purchases US specific?
In 2016 Envato opened a subsidiary in the USA, and since all sales to US buyers are handled by this subsidiary named Envato USA Inc. Non US-Authors now gain income in the USA at this source (Envato USA Inc.) with their items if they are sold to US buyers. Based on the US tax law, such source income is taxable and Envato as the intermediate entity is required to withheld this tax. Like I wrote earlier, most countries raises taxes on payments of source income to foreign persons and the entity who pays this income must withhold the tax.
But Envato USA Inc isnât producing or selling anything, the authors are (As you mentioned yourself) ? I mean, I get your point and what you mean, but at the same time itâs really complicated and messy, hard to fully grasp how it works.
One thing is for sure tho, the gouvernment will do and say anything they can to get that extra cash in their pcoket.