If you’re a UK author and you’ve started selling your books via Createspace, Kindle or Smashwords the chances are you’ve started selling copies in the American market. Whilst this is great news for you, it also presents a problem in terms of being taxed on your royalties. Now I am no tax expert, and would always recommend that you talk to your own tax adviser or accountant when it comes to anything to do with the finances, however, thanks to one of my authors I have been saved an expensive trip down to London to the US Embassy in order to obtain my US Tax Identification number.
I thought I had done all the research and had just about decided the least costly approach would have been a special trip to London, as the only alternatives I had found either cost in excess of £400 for a dedicated agent to handle the matter for me, or would have required me paying both a notary and then paying for an Apostile (its a legal document that fastens to the notarised copy of your passport).
I’ve been selling on Kindle for over a year and have regularly received my UK royalties in full, but haven’t quite got to the $200 threshold for .com sales. If I didn’t do something about it soon I was going to have a 30% tax withholding deduction made before I received the payment, coupled with the conversion fees from my bank on converting a cheque from US$ into sterling. That soon takes a chunk out of your hard earned royalties!
I have also sold print books in the USA via Amazon.com thanks to Createspace and as they only have a $10 threshold before they pay into your UK bank account again needed to get it sorted.
One of my authors pointed me in the direction of this excellent blog post by Catherine Ryan Howard which advised that I could obtain an EIN number over the phone. This is an employer identification number as opposed to the reams of paperwork and red tape required for an individual tax number.
I am assuming that if you’re selling books you have registered as self employed with the HMRC. Even though you won’t be paying the 30% withholding tax in the USA you will be taxed on the income as part of your UK tax return.
I followed the advice in the blog post step by step and within less than ten minutes had an EIN number, which I then added to the individial W8-BEN forms for Kindle, Smashwords and Createspace and duly posted off. (Note: Express Air Mail takes four days but costs around £5 more per envelope than standard Air Mail which takes five days – guess which one I went for!)
Now I have yet to receive confirmation from the various companies that the paperwork has gone through, and will update the comments/blog accordingly, but what I can tell you is that the process to date has certainly been a lot smoother than the one I had anticipated I would have had to go through! In the meantime huge thanks to Catherine for compiling her blog post and saving me so much time, money and energy!
(PS I checked the call tariff for my phone provider and found that even the call to the USA was free as it was inclusive on my package!)
I thought it was worth putting an update on here as to how the process has worked.
Createspace worked first time, Smashwords seem to have a problem finding the form to process it, yes we are now in December, six months after it was sent off, and their accounts department are unbelievably slow at responding to queries.
Kindle, despite being part of Amazon operate a totally different system to Createspace and have just sent me my first royalty cheque in US$ less the 30% withheld tax, they had a query on the first form as I put my name and trading as then my business name so I had to send one back showing just my name, which they now appear to have lost.
Lulu despite me thinking they were a UK based company and me being a UK based author also withheld tax on one of my royalty payments so don’t forget to send them the form as well. They’ve sent through a US address for the form. I’ve since deleted all my books from Lulu as the royalties were so poor and the print costs too high compared to Createspace.
Fotolia is a stock photography site and actually allowed me to enter all my information online and verified it within minutes.
At the time of writing I’ve just come a cross a way of getting around the Kindle requirement for a US bank account in order to avoid receiving cheques when I finally hit the $100 threshold (they obviously mean $100 after tax has been deducted by the way) and I’ll blog about it as soon as I know that works.
The system above does work, you just have to keep chasing and following through to ensure the W8-BEN has actually been received and processed at the other end.
How have the rest of you got on with this?