US Backup Withholding Tax

Envato Authors Author Hangout
1

Hi guys,

We are a Non US person, we have some doubts about US Tax.

Until now we have 3 sales this year (2016) from 3 different country, USA, New Zealand and UK.

Sales from USA and New Zealand buyers, envato take 28% US Backup Withholding Tax (Don’t understand that too, because Portugal has income tax treaty with USA, only 10% ). Sale from UK buyer, no tax.

Our question is, why envato deducted tax from a New Zealand buyer??

Thanks and Happy new year!

2

Did you fill a W8 form with a valid TIN?

If you have not filled a W8 form, 28% will be withheld on all your sales.

If you have filled a W8 form but without a valid TIN, 30% will be withheld from your US sales only.

If you have filled a W8 with a valid TIN, then the tax treaty would be applied and 10% would be withheld.

Also note that they started collecting taxes on January 1st around 11 am Melbourne time. Maybe the UK sales happened prior to 11am?

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3

Does anyone know if they will send the cash back according to our situation once we provide the valid TIN?

4

I have filled the form without a TIN, and I got 50% withheld from my first US sale. weird, thought it was going to be less than 30% :confused:

5

Nope. The IRS keeps it all.

6

It should be 30%. But they withhold 30% of the item price, not 30% of the author’s cut.

7

Thanks for your reply. But what I actually got from 30$ item’s price was 7.79 (which is 50% of the author’s cut, not of the total price)

8

Here is the breakdown as I understand it:

List price: $30

Buyers fee (20%): $6

Item price: $24

US Tax (30% of item price): $7.2

Author fee (may vary but starts at 37.5% of the item price for exclusive authors): $9

Your net earnings (item price minus tax minus author fee): $7.80

Unfortunately, it adds up, this is no mistake.

2 Likes
9

Thank you! it makes sense.

Do you believe I’ll be getting the same cuts on sales from buyers from non-US countries?

Thanks enjoy your weekend :slight_smile:

10

Since you filled the W8, the tax withholding only applies to US sales. So you’ll be fine with non-US sales.

Have a nice weekend as well :smile:

2 Likes
11

Thank you sir! you have been so helpful :slight_smile: !!

12

In March 2017 you will receive a copy of the Form 1042-S from Envato.

This is a summary of the taxes withheld and can be used to claim back the tax when you declare your income of 2016 for local income taxes in your country. The process of claim back the US withholding tax depends on the tax law in your country. It’s best to talk with a tax advisor how this can be done in your country.