Self-publishers: Taxation and business lowdown for POD and eBooks
© Declan Conner and declanconner.com, 2011.
Taxation depends on personal circumstances and the various tax treaties between America and your country of tax residence. Most of the distributors are based in America and for Americans the situation is straightforward. For those who live outside America, by law, your POD and eBook distributor have to deduct withholding tax of 30% on sales in America until you can prove your claim not to pay tax, or to pay tax at a reduced rate if a tax treaty covers your country. If there is no tax treaty, then tough, you will have to pay the tax.
But before we talk about taxation, it is best to look at the business of self-publishing and trust me; it is a business, if you are to take it seriously. The more I learn about the subject of self- publishing to pass on to others, the more I am of the opinion that every author’s aim should be to secure that all elusive contract with a traditional publisher through a literary agent, or leave their manuscript safe and secure on the hard drive.
I just wonder, as author’s tread the path of self- publishing if they realize how little money there is to be made. Sorry, I will rephrase that to . . . how much money there is to be lost.
If you look at the development costs for what is a business, it is very easy to throw $5,000 down a hole. Of course, through sites like mine and there are many, there is plenty of advice for would be self-publisher to produce their book for a fraction of that investment. (Providing you don’t count the unpaid cost of the hours of writing etc)There has to be a stronger motivating force than making money, or the patience to play the long game, because there is very little profit to be made from self-publishing either eBooks, or dead tree books for the average author.
Unless the money you intend to invest is no more than you would spend on a hobby, or you either want to see the fruits of your labor displayed on your bookshelf at home, or you are driven by the need to have the general public read your story, then consider every aspect of what is a new business and you just may strike it lucky.
‘Amanda Hocking,’ you shout, ‘she made a million from her eBooks, before a traditional publisher offered a million for a series of three books.’
‘Don’t get carried away,’ I say, ‘Amanda is one in a million.’
Like any business, you should have a business plan as well as a marketing plan to have the slightest chance of success. Before commissioning that book cover designer, editor, or proofreader, set yourself a budget, get quotes and research the production costs. These costs are all your initial investment, which you can set against your tax return as self-employed expenses. On this subject, it is wise to save every receipt for every business expense and for capital equipment used in your business. The list is extensive, but will include such as your computer and printer, subscriptions, editing and sundries, etc. On the subject of editors, insist they provide you with an invoice.
It is not possible for me to give advice on individual personal circumstances, or how royalty receipts are dealt with by your countries taxation regime. Taxation is something you will have to take advice on, either through an accountant, or by searches on your countries Internal Revenue sites.
We can now move on to work out the cost price of your paper book. Your gross profit will be the margin you set for your royalty. In the case of eBooks, if you sell your eBook through kindle at $2.99 or more, your profit per sale will be 70% on American, UK and Canadian sales and sales in all other countries it will be AT 35%. Set your price at less than $2.99 and your royalty will be set at 35%.
Once you are in a position to set your retail price, there are many factors to consider that could be more to do with marketing than common sense. First, consider this. . . If you set your price of your paper book at an uncompetitive price, be prepared to sell only to friends and family and kiss your investment goodbye.
If you set your price at say $0.99c for your kindle book, then your gross profit per sale will only be $0.35, or if you are British 0.25p. I’m sure you all have calculators, so work it out from there how many eBooks you need to sell to get a return on your initial investment. I am not saying don’t do it, it would be hypercritical of me as my books are set at $0.99c and price can be a useful tool to gain a reader base. However, be warned, without marketing, price alone will not gain you sales even if you offer your book free on kindle. You’ll soon find that out when you go on the forums on Kindle boards, or Authonomy and hear the reports of low sales figures.
Don’t be put off by my article, publishing you work can be a very personal rewarding experience, just make yourself aware of the facts. One fact is that most new small business don’t make a profit in the first year. Another fact is that, once an author has become an estabished brand, with a reader base, usually with in the region of four books, it is possible to make a profit as many will tetstify.
For detail on how to claim your rights under a tax treaty for your country to the IRS, There is a tax guide under the tab formatting POD for you to do it yourself.
© Declan Conner and declanconner.com, 2011. Unauthorized use and/or duplication of all or any material, or articles and guides published on this site without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Declan Conner and declanconner.com with appropriate and specific link direction to the original content.