Below is a copy of a recent email from Smashwords (who I really prefer over Amazon Kindle as an ebook publishing and distribution platform, but I use both) regarding new legislation (VAT for Euro-zone) and other updates. This means that your ebook/s are now taxed for VAT. OK if smashwords can figure out the paperwork for you, bloody awful if you are selling digital media directly. This is really bad for indie publishers and small businesses involved in digital media. I have posted on this issue in more detail on other blogs (Amazon etc to benefit from new VAT legislation etc). Anyway, just an update from Smashwords, as you will see below .
“1. NEW VAT PRICING OPTION IN PREPARATION FOR JANUARY 1 EU VAT CHANGES
On January 1, new VAT (Value Added Tax) rules go into effect in the European Union. In the past, the VAT tax, which is deducted from your sales price before your royalty is calculated, was 3%. The low rate was made possible by Smashwords retailers exploiting a loophole in the VAT rules which previously allowed the VAT rate to be based on the geographic location of the retailer’s European headquarters. So retailers located in Luxembourg where VAT was only 3%.
As you may have heard, this loophole closes tomorrow, January 1 2015. Going forward, retailers must deduct VAT tax based on the geographic location of the customer. This means that effective January 1, myriad tax rates will be applied to your ebooks when sold at Smashwords retailers such as Apple iBooks, B&N, Txtr and Kobo.
What Smashwords authors need to do to prepare: Smashwords titles are already compliant with the new tax scheme since Smashwords has always conveyed VAT-Inclusive pricing to our European retailers.
However, although many authors were never concerned about the 3% VAT previously deducted from sales prior to their royalty calculation, most authors will notice the new VAT rates because they average around 20%.
With this in mind, we today launched a new VAT pricing tool at https://smashwords.com/dashboard/vatManager that gives you greater control over how we handle your pricing in the countries affected by these new VAT rules.
You have one of two decisions to make today, neither of which are desirable.
1. Choose to do nothing – You can leave your European pricing as it is, and your VAT will continue to be deducted from your regular sales price in each country as it always has been, yet the rate will increase. This means on average, you’ll notice a 17% drop in your per-unit earnings for sales in the UK and Europe. By doing nothing, you’re choosing to bear the burden of the tax rather than passing the tax on to the customer in the form of higher pricing. The advantage of doing nothing is that your prices remain the same, and since some authors and publishers are raising prices, it means your books are actually likely to become more price-competitive if you do nothing.
2. You can choose to use our new VAT Manager tool to pass the VAT burden on to your customers. This will allow you to preserve the same approximate earnings per unit sale that you previously received, but it will also increase the price of your book in each territory. Territories with higher VAT rates will experience a bigger price increase. By passing the VAT burden on to your customer, your books will become more expensive, which means they’ll probably become less desirable to price-conscious customers. Once you opt in to our new VAT Manager tool, all future price changes at Smashwords, as well as all future titles released at Smashwords, will have their prices auto-adjusted to pass the VAT on to customers in the affected countries.
Which decision is right for you? This is your personal decision, but we think the best option is for Smashwords authors and publishers to leave their pricing as it is. It’s not a recommendation we make lightly because your per-unit earnings will drop. It also means that the retailer’s cut, as well as Smashwords’ commission, will also drop correspondingly. As one Smashwords retailer told me, “We’re all getting hit with the same stick here.”
Worth considering: Amazon has announced that it will automatically increase KDP title pricing effective January 1 (the same option we’re making available to you as an opt-in option). They have also announced that after they raise your prices higher, they will price-match your Amazon titles if your titles are available at other stores for a lower price. Since no author enjoys receiving Amazon’s nastygram price match emails, you have an decisions you might make. If you choose to leave your Smashwords prices as they are (i.e., you choose to eat the VAT hit), you can click to your Amazon Dashboard and lower your prices at Amazon to quell Amazon’s price-matching robots. Or, you choose to opt in to the Smashwords VAT Manager tool, we’ll adjust you prices so they approximate Amazon’s new adjusted prices. Your choice.
If you choose to raise your prices in the countries affected by the new European Union VAT scheme, you can do so now by clicking to https://smashwords.com/dashboard/vatManager Please carefully read the instructions on that page before making your decision.
2. SMASHWORDS YEAR IN REVIEW, AND WHAT’S COMING IN 2015
It’s been a busy day today! Earlier today I published my annual Smashwords Year-in-Review blog post, which also includes hints of developments we’re planning for 2015.
2014 was a busy year for us. Among our many service improvements, we added new distribution channels, increased the speed and reliability of our distributions, launched next-day and same-day sales reporting, added support for Epub3, and helped more authors than ever realize become bestsellers.
Despite the great improvements we made in 2014, we’ve only scratched the surface of the capabilities we plan to bring you in the months and years ahead. Every day we’re working to improve every aspect of our business to help you publish more successfully, more easily and with greater pride and professionalism.
As a final note on the year now coming to a close, I want you to know I’m grateful for your partnership, trust and inspiration. I and every team member here at Smashwords understand you partner with Smashwords by choice. When you make the decision to fully distribute your titles with Smashwords, not only do you gain time-savings that give you more time to write, you’re also directly supporting our ability to continue reinvesting in our business to bring you more cool tools and capabilities. Thank you for your support!
Read the full post here: http://blog.smashwords.com/2014/12/smashwords-year-in-review-2014-and.html
3. 2015 PUBLISHING INDUSTRY PREDICTIONS
Every year I pull out my crystal ball, step out on a ledge, cast fate to the wind and make predictions for the year ahead. With these predictions, I share my insight into the trends I see developing, and how these trends might impact your future as an author and publisher. It’s also my hope that these predictions will inspire you to consider the steps you can take today to realize the future you want for your publishing career.
Read my twelve predictions here – http://blog.smashwords.com/2014/12/2015-book-publishing-industry.html – and please also be sure to add your own predictions in the blog comments. What big trends are you seeing? I look forward to reading your predictions!
4. HELPFUL AUTHOR/PUBLISHER RESOURCES
Frequently asked questions: https://www.smashwords.com/about/supportfaq
Smashwords Site Updates: https://www.smashwords.com/about/beta
Smashwords blog (subscribe today via the email option!): http://blog.smashwords.com
Smashwords Video Workshops: http://www.youtube.com/user/smashwords
Create a Smashwords Interview (self-interviews): https://www.smashwords.com/manageinterview/info
Smashwords Series Manager (Manage series metadata): https://www.smashwords.com/dashboard/seriesManager
Smashwords Coupon Manager (Create custom coupon codes): https://www.smashwords.com/dashboard/coupons
How to publish and distribute ebooks with Smashwords:
Connect with fellow Smashwords readers and authors at Facebook: http://facebook.com/Smashwords
Mark’s List – Low cost cover designers and ebook formatters. Now online at http://smashwords.com/list
Thank you for your continued support, trust and partnership.
It was another great year for Smashwords authors and publishers. Thank you for distributing with Smashwords!
Do you know authors not yet at Smashwords? Please invite them to join our 100,000+ strong worldwide community.
Together, we’re changing the world of publishing one indie ebook at a time.
Happy holidays to you and yours,