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Author Topic: US ITIN Number for selling direct  (Read 9402 times)

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Poncke

« on: April 12, 2013, 13:47 »
+1
Hi all,

Hoping someone can help me.


A US Uni want one of my images for an educational program, to use it as the icon/symbol of the program. I sold the image direct. However, not so easy.

Ireland has a tax treaty with the US, but without ITIN I will pay 30% tax. However, none of the stock sites require an ITIN from me.

So whats the difference? Why do I need an ITIN now? Is there any way around this?

Some advice is deeply appreciated.

THanks
« Last Edit: April 12, 2013, 17:13 by Poncke »


ShadySue

  • There is a crack in everything
« Reply #1 on: April 12, 2013, 14:11 »
0
I can't help as I haven't a clue, but if the worst comes to the worst, charge them 30% over and above the original rate if you would have to pay tax twice.

Poncke

« Reply #2 on: April 12, 2013, 14:19 »
0
I can't help as I haven't a clue, but if the worst comes to the worst, charge them 30% over and above the original rate if you would have to pay tax twice.
YEah, I already stated the 0% tax figure. But I told them that figure was without tax, and with tax it has t be 30% more. Its not a big number, but it will sort my issue for now.

I will have to get an ITIN number as this may occur again in the future if I want to sell to the US directly without PayPal or Credit Card payments

aspp

« Reply #3 on: April 12, 2013, 14:27 »
+3
If you live in Ireland and are selling direct then you have nothing to think about. They are coming to you - effectively to your shop in Ireland. The sale is taking place in Ireland and Irish rules apply. There is no requirement to pay 30% US tax or to have a US tax number - none of that.

You simply declare the income from the sale on your self assessment tax return.

US tax (the 30% thing, tax numbers etc) - that stuff is only applicable when an agency is based in the US. If they have supplied you with a form which has a box for a tax number - the correct thing to put in that box is "not applicable".

Ps - it's the same as you don't pay US tax when a client in the US buys one of your images from, say, Alamy. Or any other non US agent.

« Reply #4 on: April 12, 2013, 14:29 »
+1
If you live in Ireland and are selling direct then you have nothing to think about. They are coming to you - effectively to your shop in Ireland. The sale is taking place in Ireland and Irish rules apply. There is no requirement to pay 30% US tax or to have a US tax number - none of that.

You simply declare the income from the sale on your self assessment tax return.

US tax (the 30% thing, tax numbers etc) - that stuff is only applicable when an agency is based in the US. If they have supplied you with a form which has a box for a tax number - the correct thing to put in that box is "not applicable".

Ps - it's the same as you don't pay US tax when a client in the US buys one of your images from, say, Alamy. Or any other non US agent.

ditto on this.

Poncke

« Reply #5 on: April 12, 2013, 14:30 »
0
Thanks, this is what they say:

Quote
There are several things to understand.

1) While there is a tax treaty between US and Ireland, a requirement to claim any tax treaty is to have a valid US tax ID number.  Without it, the tax withholding is 30%.

2) A sale would be a direct purchase of a product that we have unlimited
right to use and reproduce.    This is not a sale but a license fee - which
is considered by the IRS to be copyright income and is subject to taxes where the copyright is used.  Other customers may not be aware of this.

By the way, I am selling them an extended licence, similar to the Shutterstock one.
« Last Edit: April 12, 2013, 14:34 by Poncke »

aspp

« Reply #6 on: April 12, 2013, 14:36 »
0
Thanks, this is what they say:

Quote
There are several things to understand.

1) While there is a tax treaty between US and Ireland, a requirement to claim any tax treaty is to have a valid US tax ID number.  Without it, the tax withholding is 30%.

2) A sale would be a direct purchase of a product that we have unlimited
right to use and reproduce.    This is not a sale but a license fee - which
is considered by the IRS to be copyright income and is subject to taxes where the copyright is used.  Other customers may not be aware of this.

They are wrong. Most likely the person you are dealing with is used to dealing with US based photographers.

Although - even that does not quite make sense because it is not the business of the client to collect withholding taxes. So maybe they themselves have received poor advice.

Poncke

« Reply #7 on: April 12, 2013, 14:39 »
0
I think the guy is a consultant from payrol at the UCLA. They work with a GLACIER system and I filled out my details and it says because I am a Nonresident alien I need ITIN.

Hmmm, not sure how to convince them other wise. I will give him a call.

« Reply #8 on: April 12, 2013, 14:52 »
+1
I think the guy is a consultant from payrol at the UCLA. They work with a GLACIER system and I filled out my details and it says because I am a Nonresident alien I need ITIN.

Hmmm, not sure how to convince them other wise. I will give him a call.

they couldn't be more wrong..

their imagination is ridiculously wide that if they try harder they could even see the smurfs..

the level of ignorance is too high that it sounds like a scam to me..

« Reply #9 on: April 12, 2013, 14:53 »
0
They are wrong.

Poncke

« Reply #10 on: April 12, 2013, 15:01 »
0
I have been reading up on the internet, and it seems true that I need an ITIN. Does anyone have a link where it says that I dont need one for what I am selling?

Poncke

« Reply #11 on: April 12, 2013, 15:03 »
0
It seems agencies have some sort of agreement with the IRS, hence they dont need ITIN. For selling direct, I might still need one.

« Reply #12 on: April 12, 2013, 15:07 »
+1
well 4 of us here tried to help..

if you still insist that you need an ITIN, then get one  :D

Poncke

« Reply #13 on: April 12, 2013, 15:15 »
0
Look, I am not insisting on anything, I have searched several government websites and they all say the same, I need an ITIN. I believe you guys, but I cant just go to the guy saying someone on a forum says....

If I have a link where it shows I dont an ITIN I can show that to him.

I appreciate your help, but I need to have something to refer him to.

Thanks again.

By the way, I found these, suggesting the agencies have agreements with the IRS

http://www.microstockgroup.com/depositphotos/why-do-we-need-itin/

http://www.microstockgroup.com/fotolia-com/no-need-for-an-itin-number-with-fotolia-or-any-other-site/

« Reply #14 on: April 12, 2013, 15:19 »
0
.
« Last Edit: May 12, 2014, 14:47 by Audi 5000 »

hotwalkn

  • ...I have a lens fetish...

« Reply #15 on: April 12, 2013, 15:23 »
+1
The program was created in 1996 for the purpose of tax filing of individuals without a social security account number
« Last Edit: April 12, 2013, 15:28 by hotwalkn »

« Reply #16 on: April 12, 2013, 15:25 »
0
.
« Last Edit: May 12, 2014, 14:47 by Audi 5000 »

« Reply #17 on: April 12, 2013, 15:26 »
+2
Look, I am not insisting on anything, I have searched several government websites and they all say the same, I need an ITIN. I believe you guys, but I cant just go to the guy saying someone on a forum says....

If I have a link where it shows I dont an ITIN I can show that to him.

I appreciate your help, but I need to have something to refer him to.

Thanks again.

By the way, I found these, suggesting the agencies have agreements with the IRS

http://www.microstockgroup.com/depositphotos/why-do-we-need-itin/

http://www.microstockgroup.com/fotolia-com/no-need-for-an-itin-number-with-fotolia-or-any-other-site/


simple logic..

you are in ireland.. you are not a US citizen, you don't live in the US.. your business is not registered in the US.. your direct sales channel has nothing to do with the US..

you don't need an ITIN, the same way you don't need whatever form of number they have in Iraq, japan, saudi arabia, nigeria, egypt, germany or other 200 countries in the world.. you don't even have to know that such thing as ITIN exists..

aspp

« Reply #18 on: April 12, 2013, 15:29 »
+1
You would need a tax number if they were sub licensing (selling on) your work and paying you a royalty of sales which they collect. But that is not what you have implied.

When an agency sells a licence to use your image they pay you a royalty. In this case though you are selling them direct (in Ireland) a licence to use your image. They are not paying you a royalty.

The term 'non-resident alien' would be applicable if you were temporarily in the US and for some reason being paid via their payroll system. And that, it seems to me, is the issue. It is not for them to pay you via their payroll system. It is for you to raise an invoice which they then settle.

In terms of providing a link - you are not going to find one. Because they have misunderstood the situation. But you could provide an example. Just remind them that it is the same as if they were buying an image from, say, Istock.

[BTW - The thread you linked to about agencies possibly having made arrangements with IRS is irrelevant in this context. Those are agencies which are based in the US and which therefore fall under US jurisdiction.]

Poncke

« Reply #19 on: April 12, 2013, 15:31 »
0
Ok, I saw what Thinkstock posted as well and I believe to the a nonresident alien. Or do I have that part wrong? I am not living in the US, nonresident, and I am not American, so Alien.

And yes, the ITIN, stands for Individual.

Edit: I missed what Aspp wrote, which does make sense now.

hotwalkn

  • ...I have a lens fetish...

« Reply #20 on: April 12, 2013, 15:33 »
+1
Ok, I saw what Thinkstock posted as well and I believe to the a nonresident alien. Or do I have that part wrong? I am not living in the US, nonresident, and I am not American, so Alien.

And yes, the ITIN, stands for Individual.

Edit: I missed what Aspp wrote, which does make sense now.

An Individual Taxpayer Identification Number (or ITIN) is a United States tax processing number. If you do not live in the US than you don't need it. Period. :)

« Reply #21 on: April 12, 2013, 15:46 »
+1

An Individual Taxpayer Identification Number (or ITIN) is a United States tax processing number. If you do not live in the US than you don't need it. Period. :)


Unless you are getting royalties from US based agencies and don't want to pay 30% tax up front. In that case you need an ITIN or EIN (for companies and partnerships) and submit a W-8BEN.

Poncke

« Reply #22 on: April 12, 2013, 15:52 »
0
Traveling light, I filled out my w-8ben at every agency but never filled in the ITIN and still pay 0%

I went with Aspp's explanation and will let you know how it goes. Might be helpful for future reference.

mattdixon

« Reply #23 on: April 12, 2013, 16:19 »
0
If you're a sole trader then you don't need to collect tax on any sales.

The buyer will will offset the purchase against their tax bill as an expense, not your worry unless your turnover is larger 75,000 euros. Seeing as your selling one picture, just give them a receipt for their purchase.

When you hit 75K a year hire an accountant and let them sort it out :-)

http://www.revenue.ie/en/tax/vat/registration/

Poncke

« Reply #24 on: April 12, 2013, 16:23 »
0
If you're a sole trader then you don't need to collect tax on any sales.

The buyer will will offset the purchase against their tax bill as an expense, not your worry unless your turnover is larger 75,000 euros. Seeing as your selling one picture, just give them a receipt for their purchase.

When you hit 75K a year hire an accountant and let them sort it out :-)

http://www.revenue.ie/en/tax/vat/registration/
Hey Matt, thanks! I know that page very well as I registered my business name in Ireland  ;)

Poncke

« Reply #25 on: April 12, 2013, 17:18 »
0
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.


« Reply #26 on: April 12, 2013, 17:25 »
0
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 »
+1
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

  • www.colincramm.com

« Reply #28 on: April 12, 2013, 19:27 »
0
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.

« Reply #29 on: April 14, 2013, 13:45 »
0
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 ?

« Reply #30 on: April 14, 2013, 14:21 »
0
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.
« Last Edit: April 14, 2013, 14:28 by MichaelJayFoto »

Noedelhap

  • www.colincramm.com

« Reply #31 on: April 14, 2013, 14:57 »
0
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.
« Last Edit: April 14, 2013, 15:00 by Noedelhap »

Microbius

« Reply #32 on: April 14, 2013, 15:40 »
0
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 »
0
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 »
0
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.
« Last Edit: April 15, 2013, 08:01 by Microbius »

Poncke

« Reply #35 on: April 15, 2013, 11:02 »
0
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.

« Reply #36 on: April 15, 2013, 15:15 »
+1
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!
« Last Edit: April 15, 2013, 15:24 by ffNixx »

Poncke

« Reply #37 on: April 15, 2013, 15:50 »
0
They are going to proceed without ITIN and pay me 30% more.

« Reply #38 on: April 16, 2013, 01:54 »
+1
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 »
0
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 »
0
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 »
0
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.


 

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