Createspace owed me a chunk of royalties which I have had put on hold because they are demanding a TIN number in order for withholding tax to NOT be taken off. I do business with at least 30 U.S. companies including amazon (parent), google, yahoo, and on and on, and they NEVER require a TIN.
The actual law states that a TIN is not required provided one does not have a "presence" in the USA. We don't. Period.
While support staff are polite, they are obviously not reading anything but the topic, since they have, not once, responded to the actual issue and that is that a TIN is not required.
If I don't get this resolved soon I'll pull my titles, and move our publishing schedule elsewhere -- we will be doing one more title minimum this year, and perhaps more, and probably 5-7 next year.
I like createspace, at least till now, but this is crazy. A W8-BEN IS required and we have sent copies twice now (one disappeared).
This has been going on so long that I'm at the point of making a decision on moving day to day.
Any ideas on how to get this resolved fast?
PS. There are reasons why I do not want to apply for and use a TIN unless the law requires it, which it doesn't, and they have to do with the U.S government then assuming that we do have a presence in the USA, and then we get into all kinds of potential sales tax issues.
I find this extremely irritating too. Their definition of royalties (as opposed to "publisher profit") is incorrect. If you have your own ISBNs, this is especially incorrect. It's also interesting that I don't have to supply a TIN or pay tax on earnings from the Amazon Associates program. I don't see the difference here.
For this reason, amongst others, I have moved most of my projects to Lightning Source, and only use CS for bulk printing. Even all my Amazon sales go via LSI. It will take you a while to get set up there, and their set-up fees might be a show-stopper for you, but at least they don't withhold any of your profits for tax purposes and don't require a TIN.
Sorry I don't have a faster solution. The other option is to let CS withhold 30% of your "royalties" for tax, then claim it when you do your Canadian tax return.
I'm using a CS ISBN.
What happened to the tax treaty? http://www.transitionfinancial.com/us/income_taxtreaty.htm
Looks like, either way, you only pay tax once. US or Canadian, not both.
Does that help or make matters worse?
You have to supply a TIN to get any benefit from the tax treaty.
But yes, you only have to pay tax on that money once. So when you do your tax return in your own country, you need to mention you have already paid tax on your royalty income in the US. However, if you don't have a TIN you have to pay 30% whereas you might only have to pay, for example, 20% in your own country.
According to the IRS website, you must supply a TIN to be eligible for tax treaty benefits.
You need a TIN only if you have a business presence in the USA. We don't. NO other company requires this because it is not required under the law. Once you are deemed to have a business presence, the entire field changes, and then you have to deal with State issues and various taxes besides income tax.
THanks to all respondents. I'm looking at pulling our titles and ending our relationship. At minimum, I expect a call from someone at createspace who will give me a proper explanation and explain why createspace is different from every other USA company we deal with including amazon.
I kind of doubt that google and amazon are breakng the law and we get a lot of money from them, pay our Canuck taxes, all simple.
It's a pity. It's all gone so well at createspace, and one way or the other, I'll be ok. They are probably going to be losing $100k+ over the years we could have worked together, via our books.
As someone who does business with other US based companies and not had to get a TIN for them, I can only commiserate with you as well. I, like Michelle (lipmag), find it extremely irritating as well.
The only explanations you'll probably get from CreateSpace are roundabout ones, but the true answer is probably one that you’ll never get: that it'll cost them too much money to deal with it and it’s too hard for them from an accounting perspective to work it out and it's easier for them just to take out the tax and lose business.
For ISBNs not issued by the US ISBN agency (i.e. if you’ve got them from the Canadian ISBN Agency rather than the US ISBN agency), then revenue falls outside the US Tax Code definition of royalties and therefore tax is not required to be withheld. For ISBNs issued by the US ISBN agency (this includes the free CreateSpace ISBNs as well as ISBNs issued by the US ISBN agency), then the US Tax Code defines that an ISBN issued bu the US ISBN agency has a sufficient nexus with the US for the revenue to fall within the US Tax Code definition of royalties, and therefore requiring tax to be withheld by CreateSpace for the free CreateSpace ISBNs (or if you have ISBNs issued to you by the US ISBN agency).
For CreateSpace to cover themselves to avoid messing with the IRS, their corporate legal team would probably want a ruling from the IRS (protracted!) and they'd have to have someone internally check which each and every ISBN Agency which issued each and every ISBN not issued by them... and then make a list of which revenue they’re not supposed to withhold tax from... and then reimburse all the people for the tax they've incorrectly withheld... and then deal with the IRS about how to handle that...
I too am with LS for distribution to Amazon, etc, purposes and have never had a cent withheld. Lulu is another place where I get my printing done (mind you for proofs only, I don't use them for distribution, as their print prices are higher than LS and their retail pricing structure is woeful but what Lulu costs me in proof costs in costs it saves me in revision fees at LS and having to have a dummy proof from CS) without having tax withheld.
Block 6 on the W-8BEN specifically requests a US TIN (SSN, ITIN, or EIN) if required. The form's instructions state this ID number must be provided to claim benefits under a tax treaty unless the income is related to securities. It sure looks like Createspace is doing this the correct way while the others mentioned aren't. Can you post the specific wording in the law which states a US TIN is not required unless you have a physical presence here?
I don't understand your concerns about obtaining a US TIN. It doesn't tie someone with no physical presence here to any state. If all your books are sold through vendors like Amazon, they and the purchasers are on the hook for dealing with state sales/use tax issues.
If Creatspace withholds money from sales, you can always file a tax return with the IRS requesting all or part of it back based on the tax treaty. You'll need a US TIN though to file.
Thanks. What a great response. I'm looking at Lulu, because I'm now more vexed at the "support" responses I've gotten back.
I expect a detailed explanation of why Createspace is different than all other companies in this respect and not another email telling me to get a TIN.
Wondering if some things might have changed, because I can't find the clause that exempts the IRS requirement for a TIN. It certainly DID exist and had to do with any entity that did not have a "presence" in the USA.
Here's the problem. The issue of physical presence is actually not the issue. It's the vague issue of "business presence" that crops up periodically, and the criteria sometimes move around. Because of that, and the possiblities of having to get into more and more paperwork to satisfy different levels of government, I don't want to have even a HINT that I am subject to US laws that apply to business presence.
I do not know whether they will turn around and say: If you have a US TIN, then you have a business presence, and thus you are now subject to sales tax, internet tax, internet business tax and so on.
What I want is a clear explanation of why Createspace requries this, but no other company in 15+ years has asked for it. If I have to do it because the laws have changed and all companies will require it fine.
Right now it's only Createspace. Why?
But now, I'm peeved that I can't get an intelligent response from Createspace on this issue.
Every minute and hour I spend with this issue, or processing unnecessary paperwork is time I cannot spend writing or running my business. If its really necessary, I adapt. If it's not I'd rather not do it. And I expect convincing. Why is Createspace different?
The IRS knows about they problem. They have identified the issue of companies not withholding tax properly as a "Tier I" enforcement issue. That means it's going to be their top priority to get companies to either get a W8-BEN from payees or withhold at 30%.
As you've experienced already, selling a product or service in the US market establishes sufficient presence for our fed gov to go after a cut of the revenues. Whether or not one has a TIN is immaterial.
The taxes you mentioned are or probably would be administered at the state/local levels. They have a myriad of other taxes. To be subject to these, a minimum presence is required. Each gov entity has its own criteria for this. Generally it comes down to physical presence. I don't think Congress will ever pass a law changing the criteria to simply having a TIN. The feds would lose control. Cash-strapped lower-level gov entities would go on a feeding frenzy. The U.S. would probably implode.
States have wanted and still want remote sellers to collect and forward sales taxes. Back in 1992, the US Supreme Court ruled that retailers are exempt from doing this in any state where they do not have a physical presence. The court's reason was that complying with over 7,500 tax jurisdictions here was too complex and would strain interstate commerce. The court said Congress can write a law for remote sellers if the tax structure was simplified. Eighteen years have gone by. If our elected officials ever decide to pass such a law, those actually selling your book here will be responsible for collecting and forwarding sales taxes.
Over the last three years, a few cash-starved states have enacted legislation targeting remote online retailers which have commission agreements with in-state residents. Their officials claim affiliates give a company physical presence and thus are required to collect sales taxes for them. Amazon has been fighting in court with at least one state over this. Whenever legislatures pass or come close to passing something similar, Amazon, Overstock, and some others have been dumping their affiliates within the respective state abruptly and without warning.
Why is Createspace different? They may never tell you. Perhaps a higher percentage of their clients are foreigners, so they're more aware of the requirements. Perhaps they have sharper accountants. Perhaps they had a more recent IRS audit than the others. It's easier for auditors to check out small companies more thoroughly than huge ones. The latter group can do something wrong for a much longer time before being caught.