Avoiding Amazon’s Double-Whammy On Tax!

Yes, the title’s a bit of a mouthful but this post contains vital information for any non-US authors wanting to get ALL their royalties from Amazon.

Earlier this year I found out the hard way that – unless you’ve completed the right paperwork – Amazon withholds 30% of royalties from all sales on Amazon.com for anyone without an American tax exemption number.

There’s NO way round this. Even though, as a British citizen, my country has a reciprocal tax treaty with the US, the onus is on me to prove why I shouldn’t pay tax in the US. (Despite the fact I’ll pay tax in the UK anyway.)

It’s also worth pointing out that Amazon do NOT refund tax that has previously been withheld. They will only pay all your royalties ONCE you have a tax exemption number and they have received the relevant form.

Amazon do provide advice on this among the FAQs on the KDP publishing site but it’s not exactly obvious and the instructions on how to complete all the paperwork are pretty vague and confusing.

Don’t get an ITIN

As detailed in a previous post – Death & Taxes – the information provided by KDP made me think I needed to get an ITIN number from the American IRS, which would have involved taking my passport to the US Embassy to prove my identity!

Luckily, fellow author Samantha Holt set me right and the information below is a rehash of an extremely helpful post she made in November last year.

The most important point is that you do NOT need an ITIN number.

Instead, an EIN number can be obtained by making a single phone call to the US. (I estimate this cost me about £3 in call charges rather than the £35 it would have cost me to get to London on the train, not to mention taking a lot less time!)

Applying for an EIN

You need to apply for an EIN as a foreign entity and sole proprietor. Here’s the process:

1. Call 001 67941 1099 – bearing in mind the time difference and office hours! (I called at about 2pm British time.)

2. Select the right option for applying for an EIN as a foreign entity.  (It was #1 when I called.)

3. You may be asked if you have filled out an SS-4 form. This is not necessary – says so on the IRS website. (The person I spoke to said it might have been ‘helpful’ but it could all be done on the phone.)

4. Explain that you are a sole proprietor.

5. You will need to spell out your name, address etc very carefully and slowly – they will, however, read it all back to you.

6. You will then be given an EIN number over the phone. An official copy will come in the post several weeks later.

The whole process – including waiting on hold for ages – took about 30 minutes for me. Samantha got it done in less than half the time despite her Scottish accent!

What next

Once you have your EIN number you then need to complete a W8-BEN form. KDP provide an example of a completed form or there are detailed instructions for completing it here.

Now send the completed form, with a covering letter to: Amazon.com, c/o AP Tax,  PO Box 80683,  Seattle, WA 98108-0683, USA.

If Amazon receive your form before 10th of the month, you will get full royalties for that month. If it arrives later, it will only come into effect for the next month’s royalties. (I sent mine off last month and got an email confirmation from Amazon soon after so I’m looking forward to getting ALL my royalties from August on!)

Good luck.