What Canadians who sell Kindle e-books need to know

March 27, 2012

This post is for all my Canadian author friends who sell – or are thinking of selling – their books as e-books using Amazon’s Kindle service.

I started selling Kindle books last year. This week, I got a surprise in the mail from Amazon, a “Foreign Person’s U.S. Source Income Subject to Withholding”. Amazon will withhold 30% of the royalties they paid on the Kindle books. They are required to do this by the IRS.

However, those of us living and working in Canada are exempt from royalty tax withholding. As I understand it (and I could be wrong here, but this is what I have been able to ascertain from talking to both the Canada Revenue Agency and the Internal Revenue Service (IRS) in the U.S.), the reason for the exemption is that if you are honest about your royalty income and report it at tax time, the Canadian government will tax you on that income. The level of that tax depends on your total annual income, but it would be reasonable to say that it might be around 30% or so.

When Amazon withholds the tax, you’re essentially taxed twice… 30% on the U.S. side and another 30% by the Canadian side, totaling about 60% tax.

So, the American and Canadian governments came to an agreement that more or less says, “Canadians are exempt from U.S. taxes on royalties because they have to pay tax on their income in Canada.” (Again… I am paraphrasing according to what I understand… and I could be wrong.)

However, a problem arises when Canadians sign up for a Kindle account. Canadian authors must “claim treaty benefits” in order to not be taxed by both the U.S. and Canadian governments. (No one tells you this when you sign up for a Kindle account.) You need to correctly fill out, sign and submit a W8-BEN form in order to claim these “treaty benefits”. You can get a W8-BEN form online form here: http://www.irs.gov/pub/irs-pdf/fw8ben.pdf

Amazon will not process the form without a TIN (Tax Identification Number).

There are two types of TINs:

Steps to follow:

  1. Figure out what type of TIN you need.
  2. Apply for the correct type of TIN with the IRS. You can do this over the phone, by mail or by fax. (Canadians are not eligible to apply for these numbers online.)
  3. Fill out the W8-BEN form. You must include either your ITIN or your EIN on your form or Amazon will not process it.
  4. Send your completed, signed form to Amazon. You can scan your form and e-mail it to them through the e-mail address they provide on their site.

Do all this as soon as you set up your Kindle Direct Publishing (KDP) account. That means, do it before you make your first sale on Amazon. Do not wait! Get it done right away.

If you do not claim the correct treaty benefits using the W8-BEN form, Amazon will withhold tax. (They are just following the rules required by the IRS).

Then, you will need to fill out both a W8-BEN form AND an affidavit form to backtrack. (I am still waiting for confirmation that they will reimburse me for the taxes they withheld for 2011).

Today I spent over three hours on the phone with the IRS (much of the time I was on hold). In total, I spoke with nine different IRS agents to try and figure this all out. (No, I am not kidding).

Most of them could not help. What I can tell you is that there are two different sets of phone numbers to call. Americans can call the toll-free 1-800 number. The folks who answer those lines can’t help foreign nationals much. There are different numbers for foreigners to call. Today I called 1-267-941-1000 and eventually got through to someone who could help.

The best answer I got was “All this e-commerce stuff is new… We’re not trained in it… But basically, if you are a Canadian working and producing your writing in Canada, paying your taxes in Canada and you do not live in the US, you should be able to claim treaty benefits.”

The one question no one was able to answer clearly for me was, “If I have a TIN will I be required to file US taxes?” The best answer that came was, “Probably not, because you are claiming treaty benefits. You may have to fill out a form to claim exemption.” But whether or not this is actually the case remains to be seen…

My big disclaimer: I am not an expert in US taxes, or Canadian taxes either, for that matter. I claim no authority or expertise in these matters. This information is provided for informational and educational purposes only. I am simply sharing my own experience and what I learned as a result of it. It is your responsibility to do your own research and adhere to all the tax laws of your jurisdiction.

Resources for Canadian writers and publishers to check out:

W8-BEN Instructions

Article 901 – US Tax Treaties

IRS Publication 515

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Update – January 2018 – This blog has had over 1.8 million views thanks to readers like you. If you enjoyed this post, please “like” it or share it on social media. Thanks!

Sarah Elaine Eaton is a faculty member in the Werklund School of Education, University of Calgary, Canada.


Are Language Textbooks a Scam for Students?

November 4, 2010

It used to be that university students taking language courses would buy a textbook and a workbook for a university course. The prices were high, but they could buy used copies. A student who wanted to sell his or her book later would be careful to do the workbook in pencil so it could be erased later.

Nowadays, textbooks companies have gone all high tech. They’re encouraging teachers to do away with “old fashioned paper workbooks” in favor of an online version. The teacher needs a course code. The students need a book code. Only the magical combination of both codes will allow students access to their high tech web student activity manual.

The scam? All of these codes have expiry dates. Students who bought a second-hand book have no access to the online activity manual, unless they cough up about $100 for their own personal book code. $100 for a code? Seriously? I have students who simply can not afford this and as a result, there is no way for them to access their homework activities.

To boot, the textbook takes a communicative approach, which is super for in class, but offers little in the way of activities to assign for homework. The homework is supposed to come from the web-based activity manual.

Not all students – even college age students – like the online versions. Anything but a high speed internet connection is insufficient to use the fancy web-based versions. Students complain about difficulties setting up their online accounts and some give up even before they get to do their first activity. Their frustration levels escalate.

The textbook rep comes in to do a demo. Everything works perfectly in his presentation and students are encouraged to try again.

Here it is the end of the semester and I still have students who haven’t done any online activities. When I ask them why, they sheepishly say they find the web versions cumbersome. Either that, or they simply can’t afford the $100 for a book code. A search for old, used workbooks has ensued so they can have paper versions to work from.

I’ve been giving them activities and materials I’ve developed myself over the years. These used to be “extra practice”, but for the students who have no other way to reinforce what we do in class, they have become their only option.

Some students are very tech-savvy, very into mobile learning. Some still like paper-and-pen activities. Others may like technology, but be cash poor. Our job as educators should be to make it easy for them to learn, not more cumbersome.

At least when we bought paper versions of books and workbooks, they were ours to keep for as long as we wanted, not until the textbook publisher decided that they expired and cut off our access to them. At best, they became outdated, but they didn’t disappear into thin air. I’m a huge fan of technology, but not when it becomes a barrier to my students’ learning.

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Update – January 2018 – This blog has had over 1.8 million views thanks to readers like you. If you enjoyed this post, please “like” it or share it on social media. Thanks!

Sarah Elaine Eaton is a faculty member in the Werklund School of Education, University of Calgary, Canada.


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