[UPDATE: Please see New tax rules for non-U.S. authors on KDP and CreateSpace for more recent information about tax withholding.]
Yesterday, while advising a client on how to fill out the paperwork for a non-U.S. resident author, I was surprised to see that the information on form W-8BEN had disappeared from the KDP website. I had been specifically trying to find the address for where to send the form, as I had inadvertently misplaced it, but could find absolutely nothing about it; now, their tax information is restricted to advice on applying for an Employer Identification Number (EIN) or an Individual Tax Identification Number (ITIN).
A few minutes later, as I was opening a Kindle account for this same client, I was broadsided by KDP’s new tax interview. This is now a mandatory exercise before authors are allowed to put a book on sale. The tax interview seeks to establish whether an author is a U.S. resident or not; if the latter, Amazon’s system generates a form W-8BEN and demands your electronic signature. If you refuse and elect to send in the paper form, Amazon will not put your book on sale until it receives your paperwork. Since you must first apply for the U.S. tax ID (the EIN or ITIN) before you need to fill out the W-8BEN, this can delay the sale of your book for months.
I find this disturbing on several levels. The first is that nowhere on the KDP site are authors warned of this new tax interview and are therefore not encouraged to learn about the issues before being hit with the demand to sign the form put in front of them.
The second, more frightening issue, is that you are required to confirm, by threat of perjury, that the contents of the form are true, and that you meet the legal requirements to file one. You may have no idea what a form W-8BEN is, yet I suspect most authors will just sign it despite the possible legal ramifications.
The third issue is that it isn’t necessary for Amazon to require authors to submit a form W-8BEN in order for Amazon to sell the author’s book(s) and issue royalties. In fact, as I did with this new client who has just begun the process of applying for her U.S. tax ID, I simply accepted the form as is, without a U.S. tax ID number inputted, and Amazon then returned a notification that it would be withholding 30% tax. This was the previous status quo: automatic withholding of 30% royalties, paid to the IRS, until you submitted a form W-8BEN containing your U.S. tax ID number and the relevant tax treaty information. Why Amazon now feel they have the right and the need to force authors without a U.S. tax ID to sign a useless W-8BEN — under threat of perjury no less — is beyond my understanding.
I suspect this new tax interview was deemed necessary due to too many foreign authors not understanding the tax issues and failing to provide the relevant forms, or not filling out the W-8BEN correctly. Yet would it not be better for Amazon’s system simply to inform any author unable to input a U.S. tax ID into the interview process that the consequence of not having said ID will result in an automatic 30% withholding tax? The interview process could then link to the KDP page on tax issues, where a more intelligent Amazon would again include ALL the relevant information. The author’s book could then still be put on sale, with the option to complete the tax interview at a later date when one has successfully received a U.S. tax ID.
