A few months ago, one of the groups I belong to on LinkedIn had a huge discussion about how tax works with e-books and print books in the US. It was so nice to be able to point to this explanation and say, read this blog and you’ll be able to assemble all your nuts and bolts easily. I did wonder for a time whether it did anything for anyone, then the lady who started the discussion sent me a message. The blog post had helped her. This felt great!
W8-BEN forms – the Non-US Meal Ticket (Sep 04, 2014)
Disclaimer: This is what I have learned, the basics, and I am sharing it with you in good faith. Since I’m not a financial or tax expert, just an author navigating financial and tax implications, I’d advise you not to rely on what I have written but to do your own research too, contact an appropriate tax professional, etc. etc. Having said that, here goes:
If you are not American and you sign up as an author on Smashwords or Amazon.com, you might sell some of your work. How do you receive payment and how much of that payment is taxed?
This is a big question for authors who do not live in the States. It became more important for me to face what seems like a daunting question when I was paid for my first story, as you can see from my last blog ‘A Cheery Surprise’.
However, it is reasonably simply to set up as you only need to do three things:
- Get an EIN or a TIN from the IRS
- Sign up for Paypal
- Post your W8-BEN form to Smashwords / do it automatically on Amazon.
Of course the devil is in the details, but it is a small and friendly demon. Let me introduce you.
What is an EIN / TIN?
They are tax numbers, the former for non-US corporations and the latter for non-US individuals.
EIN (Employer Identification Number)
TIN (Taxpayer ID Number)
I have a publishing company, so I asked for an EIN, when I went through this process a while ago.
Why do you want one?
- To get paid
- To benefit from withholding treaties that might exist between your country and the US (i.e., pay less or no tax)
How do you get one?
It is so easy to get a tax number that when I did it, I was astounded enough about the experience (it took 15 minutes) to post about it to my friends on Facebook in my ‘status’ box. And I seldom update my status on Facebook (although that might have to change).
Just call the IRS on this number: +1 (267) 941-1099
Explain why you want a number. They will ask you questions and fill in the form for you. They will give you a number. Wait two weeks and after that, the number ought to be uploaded in the IRS system and you can use it.
Note that you have to be non-US in every way to be eligible. You can’t be a US citizen, hold a US passport, have a business in the US or anything like that. The details about that are here:
What is a W8-BEN form?
A W8-BEN form is a form that you download, fill in, sign and send to US companies either electronically or physically, stating that you are a non-US citizen with a US tax number. This is the kind of form that you will sign and send to every company you deal with. It can make a great financial difference to you, this form, because if your country has a withholding treaty with the US, you benefit. You benefit because you would be charged 30% tax on any payment you receive otherwise. The US charges 30% tax – but it will charge less or nothing depending on the withholding treaty it has in place with the country in question. My country gets charged 0%; yay! South African authors and publishers, take note.
(Aside: The US might not tax but other countries may, if your work is bought from an Amazon site in another country like Brazil or the UK. More information here: https://kdp.amazon.com/help?topicId=A1CTSIBPDAAJ0M )
If you are not from South Africa, go to table one on the following link to see if your country has such a treaty with the US and for what percent:
Send off the form
Amazon: You can fill in a W8-BENform on the website and sign it electronically. They will then pay you (after a certain accumulated amount) via cheque and your US tax will be less than 30%, or nothing. Sometimes they do want a physical copy and if that is the case, they will ask you for it.
More information here:
and here: https://kdp.amazon.com/help?topicId=201274700
Smashwords: At the time of writing, the following details are correct. You need to email a copy of your signed W8-BEN form
Then post the actual signed form to this address:
Attn: Tax Compliance Dept.
PO Box 11817
Bainbridge Island, WA USA 98110
The good people at Smashwords will then pay you (after a certain accumulated amount) via Paypal.
How do I get a Paypal account?
In South Africa, you need to go to First National Bank and get an FNB account (get an account with the lowest bank charges that links to the internet), then link it to a Paypal account, which you set up on www.paypal.com. Get the people at FNB to show you how to do that. In other countries, I don’t know. Go to www.paypal.com and find out.
Do I have to pay tax in my country on my earnings?
You’ll need to find out about your country, but if you live in South Africa, most probably. You have to add what you’ve earned through book sales to your other earnings (for example, from your day job) and then you are taxed according to your accumulated earnings.
….and you’re done.