Day 75: Tax and Royalties

STARTING AN OFFICIAL BUSINESS

Since I’m technically a publisher when I publish my own books, it makes sense to be recognised as a business.  Under current Australian regulations, I’ve decided to operate as a sole trader because I don’t have to do anything special or different when it comes to taxation and other paperwork.  Because I can’t think of a business name that’s relevant to me, I’m going to operate under my own full name – Delia Strange – at the moment.  This also means I don’t need to register or apply for an ABN (Australian Business Number), because I’m already easily identifiable.  When I think of something that has meaning to me, I’ll apply for that name and get an ABN.  I need to set myself up as a business in order to get a U.S. EIN (Employer ID Number).

GETTING AN EIN (FOR U.S. TAX WITHHOLDING)

Whenever a non-U.S. citizen/resident sells a book through an American company (like Amazon), that company is obliged to withhold 30% of royalties for taxation purposes.  I have to declare that I’m not a U.S. citizen in order to lower the taxation rate to what my country’s tax treaty is.  In Australia, it’s 10% and preferable to paying 30%.  So I looked up the IRS government website to apply for an EIN and then followed the link for applying by telephone.  There was a PDF of the SS-4 form that I downloaded, printed out and then filled in before I made the phone call so I could feel prepared.  I wasn’t on hold for long and the fellow at the other end of the line was efficient.  I believe having everything written down first and in front of me when I called helped settle the nerves–I intensely dislike doing business stuff over the phone.  It was a very simple process that cost me nothing (except the international phone call charge in itself) and will save me money in the long run.  According to the IRS website, I have to renew my EIN every three years or when circumstances change. When I end up operating under a business trading name later, I’ll have to get a new EIN because I’ve identified myself with my own name for now.

THE W-8BEN FORM (FOR U.S TAX WITHHOLDING)

Now that I have an EIN, I can fill out the W-8BEN form that Amazon needs in order to not withhold tax on my behalf.  I had to look up the U.S. tax treaty for my country (Australia is section 12, point 2, which defines tax withheld should be 10%) and outline that on the form that Amazon gets.  Every U.S. company will require this form or they are obliged to withhold 30% of your profits.  I found Amazon’s tax information page on how to get the EIN and what to do with the W-8BEN form very helpful.

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