Posts by Cubell

176 posts
  • Elite Author: Sold more than $75,000 on Envato Market
  • Made it to the Authors' Hall of Fame
  • Had an item featured on Envato Market
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Cubell says

@Revaxarts, that may well be true, but there is still a pink elephant in the room that Envato need to sort out.

When it comes to money (taxes and laws), authors shouldn’t be thinking “we shouldn’t worry, it should be fine”, authors should be thinking “we are fine, because everything is crystal clear”.

176 posts
  • Elite Author: Sold more than $75,000 on Envato Market
  • Made it to the Authors' Hall of Fame
  • Had an item featured on Envato Market
  • Sells items exclusively on Envato Market
+4 more
Cubell says

What changes exactly are you guys talking about that you want delayed? The only two big changes I can see are:

1- A few months ago they announced (“explained”) how the system supposedly works, i.e. of every $10 a buyer spends, $1 is buyer fee, $2 is author fee, $7 is the author earnings (and more recently Collis also said that authors have always sold directly to buyers)

Which everyone knows turned out to be very controversial. It is clear that the system works like a commission-based system, and those “changes/explanations” have potentially huge implications for most authors in legal/tax terms.

Here is another angle that I don’t think has been mentioned yet: If in every sale there is a buyer fee (direct Envato income), it would imply that authors only get 90% of the sale figure, with 20% being a author fee (“business expense to Envato”), and 70% being the author earnings. So for correct taxes declarations, the author would have to declare 90% of the sale figure as the gross income, and 70% as the profit. Even though the author never saw the 20% or has an invoice from Envato about this or even any indication of the exact number that 20% is to declare it properly.

What that means is that most authors have likely declared the wrong figures in their taxes in previous years, which is extremely serious, It also implies that authors should have some how been collecting VAT from EU buyers all this time too. And as Themepunch is experiencing now, EU VAT offices can ask you to prove why you shouldn’t have ever paid VAT, but with Envato’s “changes”, proving that authors can’t charge VAT even if they wanted to (and that they aren’t really the sellers) is now even more complicated, as in Envato’s words “authors are the sellers” which = Envato wash their hands completely and it’s the author’s problem to deal with.

2- Envato saying they will start charging VAT to EU buyers from January 1st 2015 and then passing that VAT to the relevant governments, and of course complying with all the bookkeeping rules along the way.

This isn’t so much a change – it is the only way a marketplace like this can work, and it should have been like this from the start (VAT law is old). The VAT law is getting more complicated on the 1st Jan, and as such, Envato has to start doing it from the 1st January, otherwise related issues will get considerably more complicated/worse.

I am anxiously awaiting Envato’s next announcement about all this. I believe in declaring and paying taxes properly, so I am very unhappy about all this. I would have likely never joined here as an author knowing that the system was supposedly a “Author sells to buyer”. I stupidly (or not) assumed this was a commission based system.

I tried to think of reasons why Envato would want a system like they claim they have, but apart from potentially lowering their own tax bill, I couldn’t come up with any. Which just compounds my frustration.

A commission based system is how most stock sites and main competitors work (I contacted some to get clarification on this), and it’s obviously the simplest system for authors to work with. It means authors declare the money they actually received, and Envato take care of VAT and any other “seller” responsibilities.

After all, “authors do the creative, and Envato does the rest”.

176 posts
  • Elite Author: Sold more than $75,000 on Envato Market
  • Made it to the Authors' Hall of Fame
  • Had an item featured on Envato Market
  • Sells items exclusively on Envato Market
+4 more
Cubell says

@Pixel-industry, thanks for sharing that bit of info, however, that will only cover sales after Jan 1st 2015.

The problem everyone has here is this: if authors are “selling directly to buyers” and not on commision, then authors should have been declaring 100% of sales figures (not just the 70% commission, which you get when you reach elite), which means most authors have probably declared incorrect (lower) income tax figures. And also authors should have been paying VAT on all sales to EU buyers on all past sales -> 31 December 2014. Which as we all already know, has been impossible to even do in the current system (which works like a commission based system).

And as it has already been mentioned many times here too, one big author (ThemePunch), has already been contacted by their VAT offices and told to prove why they haven’t/shouldn’t be paying VAT on all their past sales here.

I am deeply shocked at how this is all unraveling. I’m not that interested in what the future looks like on Envato, because if the past isn’t fixed/sorted out completely so that authors know they aren’t breaking any laws because of Envato’s combination of system + terms, the trust will be broken for me.

176 posts
  • Elite Author: Sold more than $75,000 on Envato Market
  • Made it to the Authors' Hall of Fame
  • Had an item featured on Envato Market
  • Sells items exclusively on Envato Market
+4 more
Cubell says

@Chilly_orange, even if all that were true and tax offices were completely understanding about an author’s situation. That doesn’t make any of this acceptable.

The fact that authors even have to go through that because of Envato’s amateurism towards well-known global taxes is unacceptable. This VAT law is not new, it was around way before Envato even existed, it’s just that now in 2015 it is changing and getting more complex to handle. And like I said in my previous post, Envato’s TOS and claim of “misuse” of the word commission will have led many authors into declaring the incorrect income tax figures, which if that turns out to be the case, by law the author has to contact the tax office to correct it. But even at this point it isn’t crystal clear where authors stand, seeing as the system all points to a commission system, but Envato trying to claim it isn’t.

Authors are here to do “creative”, not spend their time trying to prove to their tax offices that they haven’t done anything wrong on purpose.

176 posts
  • Elite Author: Sold more than $75,000 on Envato Market
  • Made it to the Authors' Hall of Fame
  • Had an item featured on Envato Market
  • Sells items exclusively on Envato Market
+4 more
Cubell says

I’m not sure what’s worse at this point between the people freaking out or the people saying there’s nothing to worry about.

I don’t understand how someone could honestly say that ThemePunch’s situation is just some normal occurance that shouldn’t even concern anyone until the hammer drops. Any time the government gets involved, especially when it comes to a situation so up in the air as this one, I think people are well within their right mind to be extremely concerned, especially when the potential penalties are so steep (especially in ThemePunch’s case). Dealing with the gov’t is hard enough when you have all of your ducks in a row, much less dealing with them with such an up in the air situation as we’re all looking at with Envato.

A lot of folks, myself included, do this full time as our only source of income, so we have a lot riding on the success of this marketplace. Even if the authors are in the clear and the burden falls on Envato, that’s not necessarily a reason to breathe easy since Envato could get hit hard, which would in turn affect us negatively as well.

I don’t advocate freaking out, but I certainly don’t advocate acting like we have nothing to worry about here. There is plenty at stake, and while Envato handling the VAT from here on out is a major win for the authors, there are still some pretty serious outstanding issues that, as I said before, are only made worse by Envato failing to address them.

Very well said, MVP.

It’s important to remember that the only thing that matters is the law, not your personal opinions or interpretations of the law/taxes (mine included). The fact is, Envato has a system that contradicts its terms on various levels. If the terms were true, then the system makes it impossible for authors to comply with EU law, and government tax offices aren’t an understanding friend that want to help you out.

Secondly, claiming a “misuse” of the word of commission is unacceptable, many authors will have declared their income as the commission they received. If the terms + system are as Envato are trying to claim they are, then every author who declared taxes in the past years that way (I’m betting most of them) will have to contact their tax offices to change the figures. Sure the profit will likely remain the same, but a bigger gross income can affect other things.

And if you want to think of it even deeper, having to calculate your gross income (not just your commission) is a nightmare, for the first $75,000 of sales, your commission /percentage was increasing, so each sale will give you a different “business expense” (Envato’s cut) that needs to be added on to your commission, and again, we’d have to manually try to calculate this, seeing as Envato never showed you proper gross figures, even though they claim authors are sellers.

The bottom line

Envato HAVE to thoroughly sort this mess out (and soon), they can’t leave it as it is. They have to address this topic of “all transactions until Jan 2015”. Like I said before, it is very likely that Themepunch will not be the only author to go through what they’re going through. Which is so frustrating to think about, considering authors had no way of avoiding being in this situation if they wanted to put their items on Envato’s marketplaces.
176 posts
  • Elite Author: Sold more than $75,000 on Envato Market
  • Made it to the Authors' Hall of Fame
  • Had an item featured on Envato Market
  • Sells items exclusively on Envato Market
+4 more
Cubell says

@Themepunch, thanks for updating us, and I really hope it all works out for you guys.

It’s so frustrating to hear that you are going through this though. It’s all because of Envato’s system and contradictory “terms”, not because you are doing anything deceptive/unlawful.

It should be as easy as saying to the Taxman – “Envato sells author’s work and pays authors on a commission based system, and {explain how system works + point to terms which confirms the system}” but instead you’re having to prove why what Envato are claiming in their terms is wrong/unworkable/make it impossible to comply with EU tax laws up until 1st January 2015.

I fear that eventually many other EU authors will have to go through this stressful, slow and potentially serious situation with their local tax offices for all past transactions up until Jan 2015.

Come on Envato, you have to address this serious legal issue!

176 posts
  • Elite Author: Sold more than $75,000 on Envato Market
  • Made it to the Authors' Hall of Fame
  • Had an item featured on Envato Market
  • Sells items exclusively on Envato Market
+4 more
Cubell says

Hi prestahome, sorry I can’t comment on a specific authors situation except to say that if you’re concerned about something specific about your own, please do get in touch with taxinfo@envato. I think I mentioned I’ve had calls with authors who had something particular they needed assistance with, and we do our best to help in whatever ways we can.

Collis, this is extremely worrying to read. What is happening to Themepunch isn’t just a “one off”, it will likely happen to every established author from Europe. As soon as a tax offices get suspicious, they will be asking the same questions they asked Themepunch. For instance, if authors have to change their declared income because they didn’t use the “correct” gross income + the 30% (if elite) business expense that Envato apparently is, according to you – That will be a flag for them.

Why are you not openly addressing this critical and serious problem (and I’m not saying discuss ThemePunch’s case)? Are you going to stand by your “author sells directly to buyers” forever? Because you are literally throwing us under the bus with this statement. Themepunch will only be the first of many cases like this.

Again, this is the law, not some “community badges” issue, you need to address every important aspect of it.

@Themepunch, it would be extremely helpful if you could chip in a bit. Were you able to prove to your tax/VAT office that you are not the seller here?

176 posts
  • Elite Author: Sold more than $75,000 on Envato Market
  • Made it to the Authors' Hall of Fame
  • Had an item featured on Envato Market
  • Sells items exclusively on Envato Market
+4 more
Cubell says

@Doru and GraficAndMedia, if authors are in fact the “sellers” and sell directly to buyers, depending on how you guys declared your taxes, you may have to contact your tax offices to change figures of past years. Because it would mean you have to declare 100% of the sale, not just your commission. Therefore, if a buyer paid $10 for a product here, you would declare $10 gross income, and $3 as deduction for expenses (Envato’s cut), not just the $7 you received in commission from Envato (assuming you hit Elite level).

Now, on top of that if you are in the EU, and you sold more than X amount in a year, you would have had to have registered for VAT, and that means you would have had to have charged VAT to all European buyers. And then pay VAT to your Government’s VAT office. So using the $10 example from above, if the buyer is in the EU, you would have to have charged him/her $10 + 20% = $12. And eventually pass the extra $2 to your VAT office.

Which is why I asked Collis to clarify about past transactions, as there are potentially big concerns for a lot of authors (go look at Themepunch’s comments about VAT in the previous thread)

Cubell

176 posts
  • Elite Author: Sold more than $75,000 on Envato Market
  • Made it to the Authors' Hall of Fame
  • Had an item featured on Envato Market
  • Sells items exclusively on Envato Market
+4 more
Cubell says

Guys, for everyone who doesn’t understand what the VAT changes are, here is a link to the upcoming VAT changes in January 2015 in the EU (UK government): https://www.gov.uk/government/publications/vat-supplying-digital-services-and-the-vat-mini-one-stop-shop/vat-supplying-digital-services-and-the-vat-mini-one-stop-shop

Which had a very interesting paragraph:

Supplies via internet portals, gateways or marketplaces:

If you supply digital services to consumers through an online portal, gateway or marketplace then it’s important to determine whether you’re making the supply to the customer or to the platform operator. Where the platform operator sets the general terms and conditions, authorises payment or delivery, or doesn’t clearly state the name of the supplier on the receipt or invoice issued to the consumer, then they’ll be seen as making the B2C supply even if they’re contractually only an agent.

That means that Envato never had a choice but to handle all VAT related issues, i.e. add VAT for EU buyers, where relevant and then pay that VAT to the appropriate Government VAT office.

The main concern I have is Envato’s continued stance on “Authors sell directly to buyers”, because as far as I understand, that still means that up until now, every author should have declared their taxes using gross income of every sale (not just the author’s commission cut). But even more concerning, is that it also means that EU authors should have been collecting VAT payments and EU buyer information (somehow) and paying governments that VAT all along up until now.

In my understanding, these changes to VAT aren’t a “new” law, VAT is an old law, it’s just that now the rules will change in 2015 making it even more complicated than before, meaning dealing with it requires multiple full-time VAT accountants in your company, hence big companies (like Google Play) confirming they will deal with it all.

So Collis, please address the concerns about every single past transaction up until January 2015. If your stance continues to be “author sells to buyer”, then not only Themepunch will potentially have to pay an extra 20% on all earnings + serious fines, but every EU author will have to go through this.

It is imperative you clarify the future further (transactions from 01/01/2015), but more importantly you clarify all past transactions.

176 posts
  • Elite Author: Sold more than $75,000 on Envato Market
  • Made it to the Authors' Hall of Fame
  • Had an item featured on Envato Market
  • Sells items exclusively on Envato Market
+4 more
Cubell says

I think you should add that the support outlined will only be provided for as long as the theme is on sale on Themeforest. Otherwise you will potentially get a lot of extra headaches when authors delete their themes or simply leave the marketplace.

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