Why Envato does not exclude their fees from authors’ tax base?

Envato Authors Author Hangout
1

Please explain me why Envato does not exclude their fees from authors’ tax base?
Before 01/01/2016 I had from 1 item selling $6.40 - $3.52 (envato’s fee) = $2.88 net earnings.
So I have to pay in my country tax from my net earing ($2.88)

Now IRS receive information that my earnings from this sale is $6.40 (because they withholding royalty Tax from this sum) . If I submit my tax identity number IRS send this information to my country Tax Service and I have to pay tax from gross ($6.40) – US Taxes.
Why should I have to pay taxes for Evanto fees? How can I proof that $3.52 is not my earnings?
And if my country decided to make tax rate 40% (for example) I should have to pay tax more money than earn.

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2

Yes, that’s what I’d like to know too. Practically, we’re paying taxes for envato’s earnings. We’re paying their taxes, people! They don’t pay a dime for their earnings. That’s why they moved to USA, so they won’t pay taxes for their earnings from their fees from USA buyers. The USA market is probably their main market and they decided that by moving there, they’ll pass the taxes to us, the authors.

3

Yes, I would like explain from Envato. We agree pay for tax author earning why we have to pay tax for Envato earning.

4

Because it’s simply not in Envato’s best interest to do so… And probably because they can.

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5

Collis has provided an answer, as it’s been asked before. Quoting below:

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6

Speak with your accountant. You should be able to claim the Envato fee as an operating expense (i.e. you have to pay the fee in order to make the income). So in the end you still only pay tax on the net earning.

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7

I ‘m sure that Tax Service in my country does not accept document downloaded from internet (and plus on foreign language) as proof of my operating expense. Why should they trust it?
From my $6.4 sail before 01/01/2015 my income was $2.88.
OK if I have to pay 30% of it Royalty tax my income after withholding taxes should be $2.88 – 30% = $2.01
But now I receive $0.92. In fact I pay 68% from my income.
And if Envato rise their fee on $1 my income became -$0.08 :slightly_smiling: It’s absurd situation!

Once again $6.4 not my income. my income $2.88 and Envato income $3.52
I pay taxes from my income, Envato must pay taxes from their income.
Everybody must pay only their own taxes. Not others.
iStock for example withholding tax from what I earn, not from price they sell.

8

Think I may have missed something but why are you paying 30% Tax on Royalties? Russia has a 0% tax treaty.

This should all become history once you fill in your tax information in your settings page.

9

If I submit my tax identity number the information that will be provided to my Tax Service will be that my income $6.4 and I will have to pay income taxes from that sum of money.But $6.4 is not my income!!! It’s my income + Envato income.
In fact i should pay almost all money that i earn because Envato does not exclude their fees and IRS think that all this money is my income!

10

Why should the US-IRS thrust you or Envato about a deduction of your gross income by the author fees?

The USA and most countries around the world defines taxable income generally as the gross income of an individual or corporation and US-RWHT is income tax!

11

And why iStock withholding tax only form my income? My income is the money that I earn, and not the money that anybody else earn.

12

The form you fill with your tax information will determine the appropriate withholding tax rate that will be applied to your sales to US buyers. Nobody is sending anything to your tax department.

You are responsible in checking up with your accountant and paying your local taxes. Since you have a 0% withholding rate, nothing changes to how it worked prior to 2016.

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13

I’m 90% sure that when you provide your tax ID number, Envato won’t be providing details of your earnings to the IRS or to the Russian tax people. I guess they might have to if specifically requested to do so, but I don’t think it’s standard procedure.

14

:slight_smile: I just want that in my income was declare only MY income, not anybody else and I don’t want to worry about possible problem with my tax department.

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15

You can declare what you want, but after you’ve filled in your tax ID you won’t have anything withheld and that should be the last you hear about it from Envato, the IRS or the Russian tax authorities.

16

That’s not true… I have filled my tax information and declared my tax ID… I am supposed to pay %10 to US from “my income” according to the tax treaty, but envato is deducting %22 or something like that… (didn’t do the exact math)

My earnings from an $11 sale was $4.50 last month… after the US tax is deducted which is %10 for me, I should receive $4.05

but is it the case? no… I received $3.50 from that sale and paid %22-23 tax or something like that… (my W8BEN form says %10, not %22…)

envato have been a good company so far and I am sure they will correct this mistake…

17

The 10% is taken from the item price, not from the net earnings (I don’t know why).
You’re a non-exclusive author, selling a Graphicriver items for $11, so the math goes like this:

  1. Taking out the buyers fee which is $1 from the list price gives you the item price, $11 -1 = $10.
  2. 10% of $10 is $1, and this goes to the IRS.
  3. You’re non-exclusive, so Envato takes 55% of the item price as the author fee, $10 * 55% = $5.5.
  4. $10 - ($1 + $5.5) = $3.5 is your net earnings.
18

so?

why does envato pay %0 to IRS of that $10

because $1 deducted from me pays all the tax needed to be paid of that purchase…

19

I am a non-exclusive so I know well how it works on other agencies…

let’s say my commission is %45 on a given agency…

  • I make a $10 sale
  • I receive $4.50 before tax… 0.45 cents is deducted for tax and the final amount I receive is $4.05 on any agency… I only pay tax on my income… I don’t pay $1 for the whole sale…

but on envato I pay $1

why is that again?

20

Example:

  • My rate is 50%
  • Buyer fee is: 20%
  • Envato fee 30%;

Why we have pay for tax 30% ( my earning + envato fee = 80%).

Example: item price is : $100
Buyer fee: $20
Envato fee: $30
Author earn: $50.
So author only pay 30% tax of $50. But now we have to pay tax 30% of $80

I think we have to pay only 30% of my last earning.
Envato can’t treat with author like this. Tha’t not fair

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