I finally got a chance to chat with Collis and was pleased with the answers I got with regard to how all of these changes would affect me personally.
Specifically, for US authors, it looks like Envato is in the process of trying to have PayPal refrain from reporting any income from Envato to the IRS, so that Envato would be the sole entity reporting our income to the IRS, preventing the two different figures from being reported.
That was my main concern, and even though I’m obviously not a fan of the extra step of deducting expenses, it looks like some help might be on the way that will make it fairly easy to do so.
Thanks again for making yourself availabe to myself and countless others, Collis.
I’ll stop debating in this endless discussion. I just wanted to point out that all of these changes don’t affect authors absolutely at all. With anything – i still do business as i’ve done it in the last 5 years.
They may not affect you in whatever country you’re in, but there are quite a few authors that have already said that the changes have already started to affect them with regard to taxes.
And for US authors, if Envato plans on reporting a bloated figure to the IRS (our earnings PLUS the author fee), then that will most certainly affect authors, especially if PayPal is reporting a different figure. And even if they don’t report different figures, authors are now affected by needing to deduct these unnecessary “expenses” during tax time.
IOW, there are plenty of authors that are and will be affected by these changes.
Yep I completely agree with you…
1) Basically we will be making the same amount but having to pay more taxes(making less).
2) Now that it is a market platform model it seems UNETHICAL to still have to be exclusive/non-exclusive to envato.
Just to be clear, I’m not sure about other countries, but in the US, we won’t be taxed more, since you can deduct the expenses. But it’s just a completely unnecessary step that we’re going to have to make to prove that we are not actually making the bloated amount of money Envato will claim that we earned from them (or, as they are claiming, from our buyers).
It’s just looking like we’re jumping through all of these hoops and wasting endless amounts of time on all of this for no clear, justifiable reason.
I agree with Digitalscience should be a very simple thing. If you decide its a platform than use those rules and if you decide its commission based market place than use those rules.
I mean i do not understand the big deal of this whole thing. Why are people pissed off? I pay my own taxes under my company after my income so i do not understand why people are pissed off about paying taxes on their sales, here in canada it is normal to pay income tax for any income you make.
Like i said i am not a 100% sure if i understand this whole thing but it should be simple. Lets say i make 20k a year from envato then i would have to pay taxes on that income. Which here is a normal thing if i do not pay taxes then i have the government on my back.
envato also has to pay taxes on their income for the cut they take from us so it’s only fair that we pay taxes on or own incomes as well. Same thing goes with ebay you have to charge the hst in canda on anything you sell which is 13% if you do not charge it then it would come out of your own pocket. I am anti government because they screw and lie to the people but we have an obligation to pay our taxes so we do not end up in jail.
I wouldn’t say I’m “pissed off”, but I’m definitely concerned about what’s gone on lately.
I pay taxes on my earnings as well, and have ever since I started making money here. That’s not the issue. The issue is that, at least as far as US authors go, Envato has added an “author fee”, which will greatly change our gross income in addition to forcing us to calculate and deduct these “author fees” in order to arrive at our taxable income. It’s an added step that is completely unnecessary.
On top of that, Envato will be reporting this exaggerated income figure (your earnings plus the author fees) to the IRS, which conflicts with the figure (the more accurate figure of what you actually take home) that PayPal will report to the IRS, which will very likely cause issues for US authors.
Now, Envato said they are working with PayPal in order to resolve that issue, but in the meantime, I’m trying to wrap my mind around why we even have this “platform” model in the first place that would precipitate the use of an “author fee” that would cause all of these issues. It all seems incredibly unnecessary, and we have yet to hear an actual answer as to why it actually is necessary.
It seems like this “portal” model is more of a preference for Envato instead of a necessity. And at that point, when the preference by nearly every author is to go with the commission model, that’s exactly why so many authors are not happy with this decision since Envato’s preference is trumping ours.
Good question! The main reason is that we’re a two-sided market that provides platform services to both sides. Businesses focus on where their revenue comes from and our two-sided fee structure helps us balance author and buyer interests and ensure we remain focused on delivering value to both groups.
Also, as QBKL pointed out, the buyer fee is flat whereas author fees are dependent on whether you sell exclusively and your all-time sales to date. I imagine our buyers appreciate the consistency and also think we’d have a hard time justifying a variable fee with no added value. On the author side, our variable author fee is an important incentive for authors and a big part of their Envato Market identity.That said, in the future I do want to review our fee structure to see if we can streamline or simplify it. Number one on my personal hit list is the handling fee which we’ve been reducing over time, and could probably use another go around soon.
So, there are no legal/tax reasons for splitting the fee, other than not being able to justify a variable fee to buyers? In other words, are you saying the only reason why I now have an added step in figuring my taxes is because of the variable author fee?
If that’s the case, we have to get rid of the variable fee. It’s not an incentive to anyone. Becoming an Elite author (hitting the sales threshold) is incentive enough, but forcing authors to deduct the author fee during tax time isn’t worth it.
Collis, can you clarify that I read that right and that you’re saying there are no legal reasons for separating the author/buyer fee.
What would EU tax authorities do if Envato doesn’t follow the law? Will they fly to Australia and beg for some taxes?
I don’t know about the EU, but the US can and will block your site from being accessed in their country if you are found to be in violation of their laws they have for foreign businesses.
Envato isn’t complying with the US and EU out of the kindness of their heart. They’re doing it because they have no other choice but to do so if they want to continue to stay in business.
Exactly! Plus, adding it on the statement pages is rather confusing. If anything, they should just have an expenses section below it. Having a mass mixup of different sales types/fees etc is super annoying – especially when sales look just like the fees do.
Yeah, I’m not a fan of the new Statements page at all. I sure miss the days of welcome changes that benefited the authors and not changes that are being forced down our throats for some overall unknown reason.
Actually, the simple explanation is less tax-related. They two get to send out two invoices, twice more accounting to do, and they deal with a massively bigger volume of invoices/sales than authors individually. The explanation of not sending a fee invoice only to buyers, but authors too is based on the earning levels 50-70%. In order to support those levels, they also need to charge different fees to show that each user gets more or less out of the market.
Also, you can’t bill only the buyer, and also a dynamic percentage, without providing something for it, legally. You’d be billing buyers their static fee plus the author’s dynamic fee, but providing the same level of service to all buyers, no matter what they pay you in fees. There’s no legal support for that and they could probably be sued, or god know some financial control will consider it fraud or whatever. Anyways you get my point.I know it would be easier for all authors, everyone loved the old system but if they push with this platform mumbo-jumbo, what you suggest is most likely impossible.
So, what you’re saying is that the buyer fee has to remain the same percentage for all transactions, for legal reasons? If that’s the case, Envato needs to just remove the tiered system and just allow all authors to take 70% of the sale.
The author fee business just seems entirely unnecessary, especially since it’s going to complicate things during tax season, which is the last thing anyone needs.
@DoubleX, thanks for the reinforcement. I’m sure there’s some simple explanation as to why they’re splitting the fees up, but it’s just interesting that they’re likely doing it for tax purposes to show they’re behaving as a “platform”. And yet there are quite a few other things they need to do in order to truly behave as a platform, but are choosing not to do. They’re picking and choosing, and it just so happens that the things they’re choosing are making it easier for them and harder for the authors.
The only change that has benefitted authors has been Envato accepting responsibility for VAT, and that’s only because they literally had no choice.
I mentioned relaxing the review process after an author has proven he creates quality product, I never suggested abolishing the review process altogether. Most people that have suggested the ability to price one’s own product have acknowledged that a minimum platform price must be maintained, but many of you seem to have missed that point.
A few people mentioned wanting to abolish the review process altogether, which is what I was addressing. Same goes with the pricing. Some have suggested setting their own prices, while others have suggested a minimum price. I’m personally not a fan of either. Pricing is honestly the least of my concerns of this marketplace.
However, I’ve gotten on my soap box many a time about giving established authors the benefit of the doubt when submitting items, especially if each of their items (or at the majority of them) have sold very well on the marketplace. I’ve had to fight for at least 3 of my items to be approved and they’ve all done very well.
But I digress…to get back on track here a little, if the question is whether I would choose between setting my own prices or going back to the old system where all we had to worry about was creating products, I’d go with the latter.
One question for Collis or anyone else capable of offering an answer: Why is it necessary to even have an author fee? Why couldn’t Envato pull all of their fees from the buyer? In other words, instead of pulling money from both the buyer AND the author, couldn’t you just get your entire cut from the buyer? Why add an extra step for authors during tax season? Is it because the platform model dictates you to do so? If so, the platform model would also dictate you to do quite a few other things that are being overlooked as well. It just seems like you’re only adhering to the platform guidelines when it comes to taxation and nothing else.