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Author Topic: envato double taxation on assets / potentially costing you money  (Read 787 times)

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« on: February 11, 2019, 13:11 »
0
Hi -

If you have sold anything at envato over the last few years, and either have a withholding tax applied to your sales, or didn't fill in their tax form - you might want to double check that you haven't been doubletaxed. You could be owed a lot of back money from envato, because there are accounts that have been doubletaxed.

Taxes are "supposed" to be calculated on the "net" amount paid out to you. Instead, for some of these accounts, envato has been calculating taxes on the 'gross' amount after they take their commission, which could be meaning you are owed a lot of back money from them.

I.e., for simplicity, let's say you have a $100 item, and (for illustration) say envato's commission was 50% (with their $3). And let's use the 30% withholding tax rate that was used for several years with with no tax form/tax treaty/etc.

Proper calculation:

$100 net sale  - $3 commission - $100 * 50% commission - (net amount of sale: $100-$3-$50 = $47 * 30% =) $14.1 withholding tax

= $100 - $3 - $50 - $14.1
= $32.90 payable to you.

What envato has been doing for some accounts:

$100 net sale  - $3 commission - $100 * 50% commission - (gross amount of sale: $100 * 30% =) $30 withholding tax

= $100 - $3 - $50 - $30
= $17 that "was" paid to you (so envato still owes you $15.90, but instead kept it for themselves).

(i.e., if hypothetically envato took a 100% commission - then they would actually be telling you 'owe' them money for each sale generated, i.e., $100 - $3 - $100 (100%) - $100 * 30% = -$33 - i.e., $33 they would say 'you' owe them in taxes, and they would never pay you anything).

They have been incorrectly calculating the withholding tax over a long time for some accounts, so you could actually be owed
a lot of money. You should doublecheck to make sure you haven't been doubletaxed, and if you have, you should contact them
to make sure you are paid any back money.

Hope that helps some people here.
« Last Edit: February 14, 2019, 18:23 by SuperPhoto »


Uncle Pete

  • Great Place by a Great Lake - My Home Port
« Reply #1 on: February 13, 2019, 09:59 »
0
Helped me decide I didn't like their plan to start with and I like it less now.  :)

« Reply #2 on: February 14, 2019, 17:53 »
0
Hello!

Thanks for trying to help authors understand their tax obligations. To ensure clarity, our tax team (some of the smartest tax experts I know) have provided me with some information that might help you and others understand their obligations.

Envato has a requirement from the IRS to disclose the gross payment, before platform fees. You can read more about that on the IRS' website at the following link.
https://www.irs.gov/instructions/i1099msc

The backup withholding tax rate that is applied (for example, if you do not have up-to-date W forms filed with Envato) is 24%, not 30%. The exception to this is if you are in a country without a tax treaty with the US. In that situation, the Royalty Withholding Tax rate is 30% and only applies to earnings from customers in the US (the Backup Withholding Tax applies to all earnings).

We apply the Royalty Withholding Tax on the Item Price (List Price minus Buyers Fee). You can learn more about how taxes are calculated in our Author Help Center. Here's a link: https://help.author.envato.com/hc/en-us/articles/360000471243-Tax-Information-Form-W-8-Requirements-for-non-US-Authors

We work very hard as a team to ensure that you receive as much of your earnings as possible. We also do our best to ensure that where there are reporting and collecting obligations, Envato supports you as much as possible by calculating, reporting and collecting on your behalf.

If you have any questions about how taxes are calculated, about the status of your W forms or anything else related to tax, you can reach out to our tax team at taxinfo@envato.com.

« Reply #3 on: February 14, 2019, 18:16 »
+2
Exactly - the taxes are being incorrectly calculated by envato for authors that either have partial withholding tax, or have not filled in tax information. A number of authors are being double taxed.

Envato should fix that, and refund authors who have had excess tax withheld.


« Reply #4 on: February 14, 2019, 20:47 »
0
Exactly - the taxes are being incorrectly calculated by envato for authors that either have partial withholding tax, or have not filled in tax information. A number of authors are being double taxed.

Envato should fix that, and refund authors who have had excess tax withheld.

Nice dinging watch evanto twist what you found. Why should they answer and give you tax team, instead of just giving the answer? Cheating artists is a regular deal in Microstock.

« Reply #5 on: February 15, 2019, 01:03 »
+1
Quote
Nice dinging watch evanto twist what you found. Why should they answer and give you tax team, instead of just giving the answer? Cheating artists is a regular deal in Microstock.

I'm not sure if it is outright dishonesty by envato to pocket extra cash, or simply an accounting error they've chosen to ignore.

"Disclosing" and "Withholding" are two entirely different things. The "gross sale amount" would need to be disclosed, but the withholding tax would be calculated on the "net" payment to the author AFTER envato takes all their commission, fees, etc.

Quote
"We apply the Royalty Withholding Tax on the Item Price (List Price minus Buyers Fee)."

Very ambiguous statement. The parentheses infer that it is a "net" calculation (which is *should* be) - but the way they calculate it for some authors with withholding tax - they are calculating based on the "gross" item price. I.e., 2x the tax. Hence, the double taxation.



« Last Edit: February 15, 2019, 01:15 by SuperPhoto »

« Reply #6 on: February 15, 2019, 13:42 »
0
Creative Market does exactly same thing with tax withholding, that's one of reasons why I removed most of my work from there. If SS, AS and others were calculating like that, I would earn zero or close to it for USA sales (tax withholding for my country is 30%).

It amazes me how stubborn they are or simply don't care.

Poslano sa mog HUAWEI CAN-L11 koristeći Tapatalk


« Reply #7 on: February 17, 2019, 10:32 »
0
Creative Market does exactly same thing with tax withholding, that's one of reasons why I removed most of my work from there. If SS, AS and others were calculating like that, I would earn zero or close to it for USA sales (tax withholding for my country is 30%).

It amazes me how stubborn they are or simply don't care.

Poslano sa mog HUAWEI CAN-L11 koristeći Tapatalk

I'd say it is probably dishonesty/cheating if they do that as well.

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