Authors, VAT and a Global Marketplace

This year, as part of our 2014 roadmap, we’re hard at work on improvements to the financial framework of Envato Market. In a recent release to collect forms for US authors, a community discussion started that ran over a lot of different topics. There were a series of concerns that I’m aiming to address in the coming weeks starting with this post.

Global Business

Many community members asked why we were working on changes relating to countries other than Australia. While Envato is an Australian company, Envato Market is a global marketplace with authors and buyers around the world. Laws for online businesses such as ours are constantly evolving and there are ways in which other countries and laws impact on us and our responsibilities. We’re working to make sure we are doing the right thing by them, by our community and by our values.

VAT on Envato Market

Early in 2015, we’re releasing changes to Envato Market around EU Value Added Tax (VAT). For European buyers, VAT may need to be added to the price of items sold by authors located both in and out of the EU.

We’ll be managing the EU VAT compliance (i.e. collection, record keeping, invoicing, remittance, and so on) for sales made to non-business buyers through Envato Market. Although Envato Market operates as a platform, purely for VAT purposes Envato will be the supplier on record and we’ll be working with our EU team and EU authorities to ensure anything authors are required to do is minimal.

Our prices, as quoted on Envato Market, will be exclusive of VAT. At the time of purchase, we will add the applicable VAT to consumer (non-business) buyers based on the rate in their country of residence.

For EU business buyers, we won’t add VAT if you simply provide evidence of your business (such as a valid EU VAT number).

If you’re concerned about your own VAT situation, please get in touch with [email protected] to discuss any specifics (bearing in mind we’re not able to give tax advice).

Next Steps
We’re going to be kicking off the collection of some address and VAT registration details shortly in anticipation of these changes. We’ll also have a more complete VAT release notice in the lead up to 2015 with all the details.

More on the Business Model

A number of authors have expressed concern that the underlying business model on Envato Market doesn’t match the reseller model that is common in the stock industry, and it’s clear that there has been confusion.

Since our launch in 2006, our terms and licenses have expressed Envato Market as a platform with direct transactions between buyer and author, and we’ve had a general attitude of letting buyers directly communicate with sellers to ask questions, follow them and receive updates. As I indicated in the forums there have also been aspects around language in particular that have made the site quite confusing. We’ve been working to clear this up in recent years.

Overall however we’re heavily weighing up all the author feedback about the model. We are a community-oriented company, so this counts for a lot.

Next Steps
Given the community concerns, we’re investigating ways we can alleviate and address those concerns, ranging from reviewing changes to our core model through to simplifying tools and managing specific compliance burdens like VAT.

These are not small issues, so we’re working through them quickly, but deeply as well. I’ll be back to communicate with the community more over the coming weeks about how we’re ensuring authors have what they need.

Delaying our IRS Reporting and Backup WH

Last month I had announced that we would begin information reporting and, in the absence of correct taxpayer information, backup withholding on January 1st. We are going to delay these changes. Given the concerns authors raised in regard to their compliance burden and reporting complications we are working to understand better the options and obligations around areas such as duplicated 1099 reporting. We’ll loop back to the community with a fresh timeline and more information.

General Improvements and Questions

We’re working on several other things that authors have asked about in the forums – including a nexus study for US state and local tax purposes and investigation into Canadian HST. We’ll have information about these soon.

Additionally we work regularly with authors who are working through specific issues with an authority to provide them with extra documentation or information. If you need assistance, please contact [email protected]

If you’d like to discuss this post, we have a forum thread set up over here. I’ll be in it to answer what I can (bearing in mind I’m not a tax advisor so there’s lots of things that need time to answer!)

About the Author Collis Ta'eed

Collis is the CEO and co-founder of Envato. He also designs, writes and drinks tea!