When you set the price for a book in the US on the Apple iBookstore, the price does not include any sales tax. So, if you set the price at $4.99, Apple will send you $3.49 for each sale (70% * $4.99 = $3.49).
If you set the price of your books in Europe, something very different happens. Apple has cleverly based their European operation in Luxembourg which has the lowest taxes in Europe. Nevertheless, Apple is required to do two things: collect Luxembourg’s 15% VAT on digital books and advertise books with that 15% already included in the price.
What Apple doesn't make very clear, in my opinion, is that when you choose the price for your ebook in European iBookstores, you are choosing a price that already includes that 15% VAT. So, if you quickly convert your $4.99 into 3.65€, you might be tempted to choose an iBookstore price of 3.49€ for Europe. But you should know that .45€ of that amount is VAT and so the actual price of the book would only be 3.04€. This will become all the more clear when you get your sales reports from Apple and they only give you 2.12€ ($2.89) for each sale (which is roughly 70% of 3.04€, and only about 60% of 3.49€).
To figure out a better equivalent for your $4.99 book, do this:
1. Convert $4.99 to euros (google “$4.99 to euros” for a rough estimate): 3.65€
2. Multiply price in euros by 1.15 (adding 15% to price): 4.20€
3. Look for closest matching price tier in iTunes Producer: 3.99€ or 4.49€
One way to see what Apple will send you for each sale is to click on the question mark next to the Price Tier field in iTunes Producer or in iTunes Connect:
When you click the question mark, you'll see this list of Price Tiers and “Your Proceeds” which is how much Apple will send you for the sale of each book. Note that for EU customers, it's always 70% of the Tier price divided by 1.15 (70% * (Tier/1.15)).
Note also that if you click any Price Tier in the list, your book will be automatically and immediately updated to that Price Tier. No additional OK will be required, and no Cancel is available. To go back to the original price, you'll have to reselect the original price.
This same pricing issue also occurs with the Australian iBookstore (where the price you set includes about 10% tax).
This article is meant to be orientative, not definitive. I'm not a lawyer, tax or otherwise, or an accountant. You should consult one of those if you have doubts.
Great info Liz. Certainly something to consider when marketing a book in the European Union and elsewhere. BTW, does this mitigate what you had to say about the clunkiness of selecting countries to publish in?
ReplyDeleteCompare this to Amazon's policy of making the publisher set the UK/EU price _exclusive_ of VAT. The problem then becomes one of rounding: our UK retail price for Simon Clark's 'Blood and Grit 21' on the iBookstore is £3.49, but there is no way of setting this with Amazon: £3.03 plus 15% rounds to £3.48, and £3.04 plus 15% rounds to £3.50. I much prefer the fact that, with Apple, the publisher remains in control of the price seen by the end user.
ReplyDeleteWith Amazon though, working out where and how much sales tax to allow for was equally confusing. We found the information lurking deep in the FAQ pages, so I wholeheartedly agree that greater transparency on this issue from both Apple and Amazon _during the actual book submission process_ would be beneficial to publishers.
PS While I'm here, I'd like to say thank you for the advice, guidance and inspiration on this blog which was a great help in getting our first eBook title on sale last Friday (www.bloodandgrit.com). Cheers, Liz!
I'm in the UK, and I think that if I wanted to publish an iBook on Apple's site as an independant publisher, I would need to obtain an American Tax number. ( I haven't looked into this fully, but I think an ITN needs to be registered.) That can be done, but isn't easy or cheap - with submission of documents and obtaining proof that I live and pay taxes in the UK. Otherwise, I would (I think) lose 30% of sales income to the US tax office who can withold it, even though the UK has a tax treaty of 0% witholding with the US, as we declare the sales for Tax here.
ReplyDeleteApparently I can declare that witholding when I submit my tax return in the UK and claim back that amount against my dues here... I am not entirely sure as I haven't yet tried this.
I am wondering though if you could obtain similar exemption for these foreign sales, or at least be able to declare this witholding of forign taxes against any amount you should pay on your own tax return. There are Tax treaties between many contries, and the amount witheld varies, and it is all very complicated. Something needs to be sorted to make this easier as people are selling around the world via the web now, and not aware how this is working out. Greetings Card Univers recently declared that sellers needed to obtain an ITN otherwise 30% of income was being taken by the US Tax office, whereas other online stores such as Zazzle still only ask for a declaration form to be submitted declaring the country you pay tax in, and then the amount according to treaty is collected. But... reading all the small print, I think Greetings Card Universe got the legal bit right, and we may all soon need to have tax numbers for worldwide selling!
@flowney, glad you found it helpful. What I have found, thanks to David Fox, is that it's much faster and more efficient to use iTunes Producer to add new territories, and not try to go through iTunes Connect. More explanation here: http://www.pigsgourdsandwikis.com/2011/10/use-itunes-producer-to-add-new.html
ReplyDelete@Chris@BBR, thanks for the heads-up about Amazon, it's really important to remember that they are asking for price exclusive of VAT. And glad you've found my blog useful!
@Jane, your tax question is a different one altogether and doesn't really have anything to do with VAT and pricing. I'm not sure how UK/US taxation works, but you're definitely right that there are various tax treaties between the US and other countries which keep you from being taxed twice. The US is not alone in retaining tax ahead of time (Spain does this as well), and so you're absolutely right that you should be able to declare these amounts on your local tax return so you don't have to pay that tax again to your local tax authority. For details, unfortunately, you have to check with a local tax accountant. And yes, you need the international Tax ID for selling through Apple, regardless of where you live.
Its just the case of different laws - while you are used to see prices without the VAT in the US it is forbidden by the law in germany (for excample) to sell or advertise anything to a final custumer without the VAT. People here are used to see the "endprice" of what they buy, if you advertise anything here in germany without the VAT included you will very fast receieve a adhortatory letter about it...
ReplyDelete@Caspar, that's precisely why Apple should be being much more clear about it. Given that they require a US Tax ID, I'm assuming that most vendors on iBookstore are American and may not be aware of the way prices are advertised in Europe. Shoot, I lived there for years and didn't realize it. If they're going to show US and Canadian prices without tax and European prices with tax, they should at least mention it.
ReplyDeleteYes, you're totaly right with this Liz, it should be way more transparent!
ReplyDeleteHi Liz,
ReplyDeleteThanks for this info -- it is incredibly helpful and prevented us from taking a loss on our books before we figured out the issue.
Just found your site while reformatting our books with 5.5 -- several of the posts you wrote saved me a ton of time! I just added a link back to your site and book here: http://ow.ly/7BOWD
Thanks!
Jennifer
A belated thanks for this Liz. I just came across it. It fits with my recent discovery that to get the same return per copy in Europe, I have to price books higher.
ReplyDeleteQuote: "People here are used to see the "endprice" of what they buy, if you advertise anything here in germany without the VAT included you will very fast receieve a adhortatory letter about it..."
The more skeptical among us see this as being done not to provide customers with an honest end price but to conceal just how large that VAT is. And that final VAT may not be the whole picture. Unlike a sales tax, it's typically added in every time a product moves through the wholesale chain.