madelaide

they take all payments we got in 2010, take tax % from it (30% in you case) and divide it equally to 10 months of 2011 starting from this March.  Earnings - tax - divided 2010 tax.

I'm sure IRS will send you a reply within a week ot maximum two. Just try to not go too much into details because they prefer to give answers to general questions. The determinant in our case is the word "used" (Publ. 519, U.S. Tax Guide for Aliens.). If "used" is interpreted by IRS as "used by buyer" (and not a POD company) then our royalty from non-US sales are 100% non-taxable.

Maria, this tax issue has also been discussed in the ProSellers forums and although I'm not directly affected, I followed the discussion. The quoted paragraph regarding foreign income for nonresident aliens has been brought up by other international sellers and that was the answer / explanation given by Zazzle.

That was only one interpretation given by one of the sellers, not by zazzle or lawyer.

The problem is that from the very beginning zazzle insisted that the reason all royalties considered U.S. income is that all products sold via U.S. site ( U.S. domain) and royalties generated/calculated in U.S. as well. These arguments are absolutely not relevant according to IRS 519 publication (Publ. 519, U.S. Tax Guide for Aliens). Moreover, IRS replied to the specific question about this issue: U.S. sourced royalties paid to a nonresident alien are classified as income which is not effectively connected to a trade or business in the U.S.

As to the word "used" - it also can be easy interpreted as intellectual property (i.e. product design) used by the customer that purchased it. For example, biz cards purchased by an European customer with my design on it are used by customer in Europe.

I think the problem is not only low commission, Main problem is that with these steps Fotolia, Istock and other agencies who decide to make such action will Kill Mickrostock business...

Absolutely agree with every word.

Which outcome is more likely: Enough contributors boycott an agency to make a dent in their bottom line, or enough contributors always support an agency enough to keep them from feeling the effects of a boycott?

I doubt that agency can keep enough loyal contributors for a long time by permanent infringe contributor's interests. And in the end, as Marinini said:

competition will slow, quality of images will drop, therefore Byers will disappear and this excellent opportunity for graphic artists and photographers - mickrostock will crash.

R.I.P.)))

IMHO, the only way to stop microstocks (not only fotolia) from becoming too greedy is a mass photo deleting/stopping uploads and the public reaction of the top contributors. By doing nothing we're just encouraging them.

I've contacted IRS via online form asking them to clarify this issue. Waiting for their reply.  In case you'll want  to contact them too: http://www.irs.gov/help/page/0,,id=120294,00.html  

Shuterstock is USA-based company too but still they never deducted tax from non-US sales. If SS and all other photo stocks did it for us -- why Zazzle can't?  I agree with Gill "they don't know the tax laws any more than us, so when the tax man comes knocking, they just withhold taxes."

Hmm.

Got my first payment with tax bite.  But they cut 30% of all of it, not just the USA orders. 

Same story. Is this legal at all? I thought no matter what your copyright royalties come from (microstock, macrostock or POD) the rules are the same: only US sales are subject to tax withholding. And there is no photostock which tax non US sales income. I suggest you contact Zazzle support and IRS support as well. I already did, but the more people will ask to clarify this point as soon as possible - the more chances things will change till next payment.