Author Topic: US ITIN Number for selling direct (Read 13562 times)

Poncke · « **Reply #25 on:** April 12, 2013, 17:18 »

I got a reply, it seems I have no other choice then to raise the sales price, which they say is fine. But I have no idea how to handle this or how to pay the 30% tax.

They stick to the fact that they are paying me a royalty and are not purchasing a product. But they are ok with me adding 30% to the cost of the licence.

cidepix · « **Reply #26 on:** April 12, 2013, 17:25 »

they are totally lost and have no idea what they are talking about

good luck to you.. it's not easy dealing with ridiculous customers.. just raise the price if that makes them happy.. you don't have to pay any money to the US for sales you made from your ireland shop..

Poncke · « **Reply #27 on:** April 12, 2013, 17:33 »

Well the good thing is, I am really proud they want my image for their courses. Its a renowned uni in the US and they insist on making this deal happen, so they are more then happy to pay 30% more. I dont see them as stupid but as my customer and I am thrilled with this deal as I will be credited on their text books and my image will the icon of their course material.

I do thank you all for the input. Its appreciated.

Noedelhap · « **Reply #28 on:** April 12, 2013, 19:27 »

Here in the Netherlands (which I think has the same tax laws as it's a EU country), when I sell something directly to the US or a non-EU country, I have to charge 0% VAT and the only tax I need to pay, is Dutch income tax. No need to worry about an ITIN or paying taxes to the US.

enstoker · « **Reply #29 on:** April 14, 2013, 13:45 »

Quote from: Noedelhap on April 12, 2013, 19:27

Here in the Netherlands (which I think has the same tax laws as it's a EU country), when I sell something directly to the US or a non-EU country, I have to charge 0% VAT and the only tax I need to pay, is Dutch income tax. No need to worry about an ITIN or paying taxes to the US.

Do You have information if US TAX office sending infos about "our stock business"
to Tax offices in EU countries ?

MichaelJayFoto · « **Reply #30 on:** April 14, 2013, 14:21 »

Quote from: Noedelhap on April 12, 2013, 19:27

Here in the Netherlands (which I think has the same tax laws as it's a EU country), when I sell something directly to the US or a non-EU country, I have to charge 0% VAT and the only tax I need to pay, is Dutch income tax. No need to worry about an ITIN or paying taxes to the US.

Just a note: Your statement is partly wrong. If you are selling something to a private person (or any legal person that is not VAT registered as e.g. public institutions) in another EU country, you will have to charge their country's VAT. The 0% rule is only valid if you are selling to companies who are also VAT registered in their country. So if the base case was the same as the OP's and you would sell to a German university, you would have to charge them German VAT.

Also, from my point of view, a "royalty" is not the same as selling a product or having income from work. This is very often treated different than other income. E.g. in Germany, companies need to pay a tax if they are using art work from people from other countries. Technically, any German company using stock imagery would have to pay this tax. This is valid unless the company can provide documentation that the selling company is registered in a country with a double-tax agreement. I worked in the European offices of iStock for some years, so believe me I know this part of the tax rules because I had to discuss them quite often.

I would not be surprised if the US has similar rules for their local use of art work. It could be very well true that a royalty payment requires local taxation where the art work gets used. And it's true that you might need to apply for an ITIN if you want to sell directly to US clients. I certainly would not dismiss those arguments right away.

Noedelhap · « **Reply #31 on:** April 14, 2013, 14:57 »

Quote from: MichaelJayFoto on April 14, 2013, 14:21

Quote from: Noedelhap on April 12, 2013, 19:27
Here in the Netherlands (which I think has the same tax laws as it's a EU country), when I sell something directly to the US or a non-EU country, I have to charge 0% VAT and the only tax I need to pay, is Dutch income tax. No need to worry about an ITIN or paying taxes to the US.

Just a note: Your statement is partly wrong. If you are selling something to a private person (or any legal person that is not VAT registered as e.g. public institutions) in another EU country, you will have to charge their country's VAT. The 0% rule is only valid if you are selling to companies who are also VAT registered in their country. So if the base case was the same as the OP's and you would sell to a German university, you would have to charge them German VAT.

As I understood it from my tax specialist:

From the Netherlands to a non-VAT-registered customer in the EU: 21%
From the Netherlands to a VAT-registered customer in the EU: Reversed charge VAT
From the Netherlands to any customer outside the EU: 0%

So, while it's true you should charge VAT to non-VAT registered customers, you shouldn't charge your customer's country's VAT, but your own country's VAT, because the service took place in your own country.

Microbius · « **Reply #32 on:** April 14, 2013, 15:40 »

I'll write a response with refs tomorrow but have had several long conversations with hmrc Re. Place of supply and license sales. Licensing ip doesn't work the same way as most goods or service, it's point of supply is the customer's country. So for example license sales abroad do not count towards your VAT threshold.

Poncke · « **Reply #33 on:** April 14, 2013, 15:52 »

Quote from: Microbius on April 14, 2013, 15:40

I'll write a response with refs tomorrow but have had several long conversations with hmrc Re. Place of supply and license sales. Licensing ip doesn't work the same way as most goods or service, it's point of supply is the customer's country. So for example license sales abroad do not count towards your VAT threshold.

Thanks a lot for doing that.

Microbius · « **Reply #34 on:** April 15, 2013, 02:36 »

15.2 is the relevant paragraph here. As outlined in the VAT Act Schedule 4A, paragraph 16(2)(a) license sales are deemed to be supplied in the customer's country i.e. it is like you have traveled to the US to make the sale rather than selling it in the UK

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&propertyType=document&id=HMCE_PROD1_029955#P627_76549

I am surprised that you haven't been asked for an ITIN before, several of the agencies, including Shutterstock, have require forms to be filled out by non US citizens to secure their zero tax treaty status that needed an ITIN or an EIN.

It is basically a way for the IRS to assign a number to people not eligible for a Social Security Number, like non residents wanting payment from US companies. It sounds like a bit of a PITA to get hold of so I got an EIN instead (same sort of thing but for companies) which you could do with a phone call.

Poncke · « **Reply #35 on:** April 15, 2013, 11:02 »

None of the agencies asked me for this ITIN, and they all approved my tax forms.

Also, I am not a company but a sole trader. So I will get my ITIN then. I heard its a pain in the behind, but better to get one now, before the next sale takes place.

ffNixx · « **Reply #36 on:** April 15, 2013, 15:15 »

UK VAT laws aren't very relevant in this. All they regulate is whether UK VAT must be charged or not. In this case, the supply is deemed to be in the customer's country, so if the customer is outside the EU, no VAT needs to be collected.

As for the US, the IRS has no jurisdiction over vendors based overseas and cannot claim any taxes payable for purchases made by US residents from such vendors. If they could, then someone like iStock would have to collect taxes for their sales to US buyers, which is clearly not the case.

This "deal" stinks, IMHO. The client is either much too wary of the IRS for some reason or there's something else at play. Only Poncke can decide how to proceed, but it were me, I would tell them there is no tax to pay or there's no deal. I definitely wouldn't go seeking an ITIN just for this. If you do, you're placing yourself under US jurisdiction, establishing a US commercial presence, which may not work in your favour at some point in the future.

Good luck!

Poncke · « **Reply #37 on:** April 15, 2013, 15:50 »

They are going to proceed without ITIN and pay me 30% more.

Imagenomad · « **Reply #38 on:** April 16, 2013, 01:54 »

If you want to maintain your original "profit", you need to add more than 30%. As an example --

Your original price $100.

You add 30% to get $130.

They withhold at 30% taking $39 and so leaving $91.

In this example, you're $9 down on the deal.

Now you may be willing to take the hit but it's just something to bear in mind.

Microbius · « **Reply #39 on:** April 16, 2013, 02:30 »

Quote from: ffNixx on April 15, 2013, 15:15

UK VAT laws aren't very relevant in this. All they regulate is whether UK VAT must be charged or not. In this case, the supply is deemed to be in the customer's country, so if the customer is outside the EU, no VAT needs to be collected.

As for the US, the IRS has no jurisdiction over vendors based overseas and cannot claim any taxes payable for purchases made by US residents from such vendors. If they could, then someone like iStock would have to collect taxes for their sales to US buyers, which is clearly not the case.

This "deal" stinks, IMHO. The client is either much too wary of the IRS for some reason or there's something else at play. Only Poncke can decide how to proceed, but it were me, I would tell them there is no tax to pay or there's no deal. I definitely wouldn't go seeking an ITIN just for this. If you do, you're placing yourself under US jurisdiction, establishing a US commercial presence, which may not work in your favour at some point in the future.

Good luck!

You are correct that the IRS has no jurisdiction over overseas vendors, the system is in place to monitor the business in the US making the purchase. Imagine how easy it would be for a US business to doctor their accounts if they could just claim expenses on an ephemeral services or licenses purchased from anonymous non residents that the US authorities have no record of.

It is absolutely fair enough if you don't want to establishing a US commercial presence, don't sell to businesses in the US. Selling to US businesses is establishing a US commercial presence.

Microbius · « **Reply #40 on:** April 16, 2013, 02:31 »

Quote from: Imagenomad on April 16, 2013, 01:54

If you want to maintain your original "profit", you need to add more than 30%. As an example --

Your original price $100.

You add 30% to get $130.

They withhold at 30% taking $39 and so leaving $91.

In this example, you're $9 down on the deal.

Now you may be willing to take the hit but it's just something to bear in mind.

Very good point

Poncke · « **Reply #41 on:** April 16, 2013, 11:13 »

Quote from: Microbius on April 16, 2013, 02:31

Quote from: Imagenomad on April 16, 2013, 01:54
If you want to maintain your original "profit", you need to add more than 30%. As an example --

Your original price $100.

You add 30% to get $130.

They withhold at 30% taking $39 and so leaving $91.

In this example, you're $9 down on the deal.

Now you may be willing to take the hit but it's just something to bear in mind.
Very good point

Yeah, I made the classic mistake, but they pointed it out to me first, told me to increase the price, so I increased the price. They are good and honest people.

MicrostockGroup Sponsors

Author Topic: US ITIN Number for selling direct (Read 13562 times)

Poncke

cidepix

Poncke

Noedelhap

enstoker

MichaelJayFoto

Noedelhap

Microbius

Poncke

Microbius

Poncke

ffNixx

Poncke

Imagenomad

Microbius

Microbius

Poncke

Related Topics

Sponsors

Microstock Poll Results

Sponsors