A lot of people still don't understand the widespread outrage against shutterstock's announcement on withholding tax. There are a large number of objections to non-US people paying this withholding tax, so instead of just dealing with them  piecemeal, this article attempts to summarise a number of the issues raised by people.

Withholding tax has been around a long time, a lot longer than shutterstock. If you want to set up a company which is going to buy and sell internationally, you have to do your homework. You pay legal experts to look into the tax implications before you create your business model.  Lack of knowledge of the law is no defence in a court. Oops sorry, I killed my neighbour, is that illegal. I promise I won't do it again. Apologists who say this whole crisis is not shutterstock's fault are simply wrong. The law was there, they should have known about it, they should have built it into their business model. They should have integrated it into their contractual agreement with their contributors (although they have done it just now, belatedly). 

Shutterstock has attracted thousands of photographers and designers to it�s agency based on conditions that it advertises on it�s website.  25 cents per download, and citing on their FAQs :
At 25 cents per download, how am I going to make any money?
Shutterstock is a subscription-based stock library. Buyers may download a few hundred pictures in a single month's membership. We get a wide variety of users subscribing, so the more images you have in our library, the more you can make! The .25 per download payout adds up fast - for example, if your images are downloaded 1000 times over the course of a month, you will receive $250 for that month! And after earning a total of $500, your rate will increase to $.33 per download, with a tiered set of pay increases as you reach the $3,000 and $10,000 milestones. If you make $250 per month, that's $3000 per year from images that would normally be collecting dust on your hard disk!

No mention of 30% withholding tax or 17 cents per download.  New photographers and designers are being lured by a falsehood. Existing non-US ones are being expected to pay for this oversight of shutterstocks.

Shutterstock did not tell its non-US contributors when they joined that they would be forced to pay tax to the US government or give their personal details to the IRS. For many non-US contributors this is a show-stopper.

Shutterstock expects all non-US contributors in treaty countries to give their personal details to the US government or take the tax hit. Divulging personal details to a foreign countries government is totally unacceptable to many people.

Shutterstock expects all non-US contributors in treaty countries to jump through hoops to get notarised documents which can cost several months earnings in some people�s cases. And then spend months sending documents backwards and forwards to the US, all because of an oversight in their own tax department.  This, to many people is totally unacceptable.  Shutterstocock has not offered the slightest help in covering these expenses.

Shutterstock expects all non treaty country contributors to pay the withholding tax, and there is nothing that they can do about it.

Double Taxation. Many non-US contributors will now be doubly taxed on their meagre earnings. Again for many this is unacceptable.


And there�s a lot more...

Shutterstock is not offering any proof at all that the money that they claim that they are withholding will be paid to the IRS. Every tax payer has a right to know that their money is being paid to a particular government. However shutterstock is simply going to deduct up to 30% from every non-US contributor�s revenue, without any form of proof that this money is going to be paid to the IRS.  Shutterstock could be using part of this money to bolster its profits. This to many people who are paid little enough is unacceptable.

The way Shutterstock is implementing this withholding tax, is as a gross tax on turnover and not on profit. There is no chance to deduct costs from the revenue. These costs include the cost of applying for the IRS documentation, depreciation of photographic and computer material, travel, models, etc etc. Let�s face it, a lot of us would be making a loss at the end of the day, and to be taxed on a loss making operation is not acceptable. 

Shutterstock has handled this situation with appalling amateurism. We have already mentioned the fact that the shutterstock has lured contributors, and continues to do so under false pretences. Shutterstock has already admitted that its first official letter on the subject to all non-us contributors was factually, and legally false, and has corrected this with a subsequent letter.  Following a massive protest on its forum, Shutterstock panicked.

It started massive deletion of posts criticizing the situation.
It started locking threads
It started banning people from the forums. Only shutterstock really knows how many people have been banned from the forums, but there are many.  When someone  is banned, they receive a message saying that they can request  clarification for why they were banned. Shutterstock has decided not to reply to these messages. Not surprisingly, as this sort of censorship in a free society is unacceptable.
They didn�t stop with banning people. They then started to delete people�s accounts, and thereby sequestering their money.  Interestingly this has happened just before payouts, so this could  yet another way of shutterstock making easy money at the expense of their contributors, and could expose them to lawsuits.

The CEO justified the massive censorship by saying :
�The only submitters that are getting banned are the ones who are being obnoxious, hijacking threads, asking for their images to be removed (we will comply with this), changing their avatars to an obnoxious message, creating false rumors, etc. It's very common after they get banned to cry on other forums and claim they did nothing. it isn't surprising that ones that cause the most trouble try to get others on their side with the same type of behavior they used in the first place to get banned from here.

If we had time to tell you about the details of everybody we ban, we would. But we don't - nor will we even bother arguing with their logic on forums outside of Shutterstock.�

�obnoxious avatars�  include those with the avatar �Stop Downloading�. How obnoxious is that?
�cry on other forums�. So once contributors who have worked hard over the years to help grow shutterstock�s business and have been subjected to immediate banning without warning are expected to keep quiet, and not mention this totalitarian behaviour on other forums?

This widespread censorship shows that shutterstock is not willing to listen to all the many hundreds if not thousands of people who are deeply shocked by shutterstock�s behaviour. Shutterstock has only itself to blame if it treats its contributors badly, and they subsequently make their feelings known.

Even if it can be justified that Shutterstock can impose this withholding tax on its� non-US contributors, the time allowed for everyone to get their paperwork in order is far too short . Estimates for getting all the paperwork vary from an absolute minimum of 4 weeks to 6 months. However Shutterstock has stated that it will start withholding tax from July onwards. This is obviously far too short a time period.

Many of shutterstock�s non-US contributors do not have English as their first language. The instructions received from shutterstock as well as the instructions on the various American tax forms are couched in legalese. Difficult enough to understand for most English speakers, for non-english speakers, understanding what needs to be done must seem to be near impossible.  Again shutterstock has failed to help its non English speaking contributors.

Shutterstock�s CEO reacted to the cries of outrage on the forum with an unbelievable statement which included amongst other shameful statements.
�Welcome to international business�.
This statement seems to overlook the fact that it his company�s lack of unknowledge of international business that caused this crisis.

Shutterstock states officially on its FAQ used to recrute new contributors

I have a comment/suggestion/bug-report. Want to hear it?
Yes! Visit our Contact Page and send it to us by email. All suggestions and comments are welcome!

This is simply not true. Comments are now only welcome as long as there is no criticism of shutterstock.  Flattery is on the other hand most welcome (and desperately needed).

Shutterstock also states officially

'Does it cost anything to become a submitter?
No -- We want to pay you! It's free to contribute, and you will get paid each time your content is downloaded. '

So would you like to pay us for the costs that we will have to make in order to avoid having the withholding tax paid? Shutterstock is clear, the answer is no.


Legality
There are a large number of legal issues which this crisis has raised �which for various reasons I�ll not mention here. However it is not surprising that shutterstock has been trying to hide the evidence of its official statements by removing the most controversial ones. There is a very real risk that shutterstock will be subjected to a number of law suits over the coming months, including class actions unless it quickly changes its policy.


I could go on, and on and on, but I hope by now the point has been made. This is a huge mess, and the responsibility for this mess is shutterstock�s. Not the IRS, not the contributors. Shutterstock, and if shutterstock loses profits, customers, contributors, and possibly even its whole business because of this, then it only has itself to blame. Meanwhile other microstock agencies based outside of the US will be rubbing their hands with glee. This could be a defining moment for the future of shutterstock.

There are those that believe that there are only two courses of action. Accept shutterstock's proposal or leave. Wrong, there is a third way, make your voice heard, and apply pressure. Already shutterstock has been pushed into making a concession.

Thankfully a petition
http://www.gopetition.com/petitions/say-no-to-us-taxation/signatures.html
 exists which allows people to express their unhappiness about the situation, and where there is no censorship of any kind. For those who feel strongly about this unacceptable situation, feel free to sign the petition.