SparkFun Forums 

Where electronics enthusiasts find answers.

Questions about the BatchPCB service

Moderator: robacarp

Is it fair that only US citizens can sell PCB's?

Not sure
By KreAture
I just had an idea!
If the issue is sending money to resellers outside US, why not atleast allow for shop credit?
This would also be cheaper for Sparkfun as the inventory cost less for them than the actual retail prices.

I'd be happy as long as I'd get something, or atleast be able to see how many order my board...
As it is I can just publish it, but have NO statistics.
By urjaman
I read some documents that say that they would just need to tax non-US residents with 30% tax. I could live with
a system that allowed turning non-US payback into either shop credit or paid with 30% taxing.
By drwho9437
This probably has to do with making money and reporting taxes. I would guess.
By drwho9437
But in the US that isn't true, and if Sparkfun sends you a check they have to tell the IRS something about it I would think. They don't want to have to abide by every countries laws and know them all, so everyone who isn't in the US is out of luck because it would cost a lot to obey all the laws...

So even if what you say is true in Norway sparkfun would have to be sure it true and thus pay to verify it then pay to make sure it is okay with US law to do it etc...

That is my guess anyway.
By KreAture
You are forgetting the store credit approach.
A lot of other shops do this, and it's perfectly legal. Look at ThinkGeek and their "gold".
I buy from em all the time and use my gold points for discounts.
By KreAture
Come on!
It's been ages and still no movement on this!
Store credit or let us sell freely!

I am in Norway and I can BUY stuff from you, so why can't you give me royalties?

The store credit idea is also a goldmine for you as you get to reduce the actual payment based on the in-cost vs out-cost of an item!
By indes
KreAture wrote:But international customers can order.
Thus they are selling internationally.

This isn't about selling, it's about paying royaltys/licencing for other peoples work.
WOW! Sadly, No. You're mad. Its 100% about taxes.
When I order from Batch, there is no tax as I am not in the same locale they are located in.
I am in Canada and have to pay local tax when the goods are imported from the US over the border - and yes, my trusty government will collect the "HST" if the cost of goods is over $20. ("HST" = VAT = Sales tax.)

HOWEVER, If I were your neighbor in the EU (whatever country, whatever street), then I'd be subject to VAT as I'd be buying from you - my neighbor thru batchpcb.. Just as I went to your local store.
If batch/spark fun sold me the goods FOR you, they'd be subject to collection of that VAT.
They would then forward it to your local government - like your local store does with sales tax.

For BatchPCB to forward tax to n number of governments - where n is the number of different countries their clients are from - is total madness.

When I buy from BatchPCB, it is their goods being sold to me. There would be no tax conflict.
When you buy from Batch, same deal. No tax conflict.
There is a CLEAR difference. Batch is selling in their own name - not yours.
Batch has better things to do than be sued for not collecting taxes properly.

My suggestion to you, Start a cheapo website and sell your goods. Nobody is stopping you from doing so (other than perhaps your local government, which would prevent BatchPCB from selling for you ANYWAY.)

Keep a stock of 5-6 boards and a materials list. Sell the PCB and the list. Maybe buy the materials and sell a kit. If you're broke and can't keep a stock - you shouldn't try starting a business, regardless of who ships your goods or collects your taxes.

It doesn't require Dell or Microsoft or whomever - anyone can sell anything. Apple was two guys in a garage at one point. Go out and do it yourself!!
By KreAture
You are setting up the wrong argument.
The music industry has done this for a long time and it is a matter of ownership and rights.
If I uppload a design to batchpcb with the agreement that they can sell it for royalties to me, it is a form of licencing and they now have the rights I don't. Since they then produce it and sell it the product is entirely theirs.
The same is true for software licences. And, just like in the royalties case it is my responsibility to report in and pay taxes on those royalties. Why do you think so many artists are surprised by tax claims and have already spent the money? They were unaware that the money they receive is untaxed yet.

In my case Norway has a limit of $688 (Yes I know, wierd number. It's 4000 nok don't blame the exchangerate on me.) before any tax demand is proffered. This is where it does get complicated though... This ammount is pr job and selling cards would be considered a job. Mowing lawns is also considered a job, but if you are helping multiple people out they can each pay you the full ammount and each be considered unique employers exempting the tax. (Even if you are infact mowing lawns for them.)

Since BatchPCB already has a disclaimer and waiver that excempts them from any responsibility for the actual design and only guarantee the product to be free from fabrication defects the issue of responsibility is moot.
They simply need a statement in their user agreement saying that you are infact giving them full rights to the design in exchange for a set royalty.

Now let's take this thing to a real example: Apples appstore!
They sell your app and has the rights to do pretty much whatever and they often seem to steal it...
They don't report any sales to the IRS, nor will they send you any tax forms. Since Apple is paying you royalties (in contrast to interest or wages), Apple has no obligation to withhold or report the payments. That means that you're responsible for reporting the payments and filing quarterly estimates of your income with any consequent income tax obligations for YOUR contry. They have however added salestax to their customers purchase price wherever that is applicable.

If you don't believe me, google it. Royalties is a LOT simpler than alternatives and since sparkfun would also be producing already sold stuff not taking in unsold stock they have nothing unrealized to report either.

This should NOT be an issue!
By indes
I won't bother arguing software vs tangible items with you. Software goes over the boarder without an official inspecting it. Its a totally different situation.

I'd love to see some proof apple doesn't report sales to the IRS as they're OBLIGATED TO in order to pay taxes. (Apple has to report ALL FUNDS (income, taxes etc) - not only the Securities and Exchange commission as it's a public company, but to it's shareholders. This includes the IRS. App store sales in California SHOULD be subject to sales tax, but Amazon is having fun with the tax man and things are a mess. Another story/legal battle.) Are you an apple developer? If so, I'd love to see the terms and conditions Apple sent to you.

If you must have google proof, You have to remember this is not NORWAY or the EU, they're operating in the UNITED STATES:

"Royalties from copyrights, patents, and oil, gas and mineral properties are taxable as ordinary income.

You generally report royalties in Part I of Schedule E (Form 1040), Supplemental Income and Loss. However, if you hold an operating oil, gas, or mineral interest or are in business as a self-employed writer, inventor, artist, etc., report your income and expenses on Schedule C or Schedule C-EZ."

-- ... 13,00.html

They would report the royalty as a supplemental loss on the income made from making the product. (Batch makes a profit from the sold board, even if royalties are paid and thus taxes must be collected and reported if applicable! )

" For FDAP income paid to a foreign person to be subject to NRA reporting and withholding, the payment must be U.S. sourced.

Following are some basic rules for sourcing of certain types of FDAP payments by withholding agents and multi-nationals:

1- Interest – If the debtor is a U.S. resident, the interest is generally U.S. sourced.
2- Royalties – If the subject property is used in the U.S., the royalty payment is U.S. sourced. Payments made in connection with the sale of certain intangible assets, including copyrights and patents, are generally sourced similar to royalties when the payments are contingent on the productivity, use or disposition of the intangible See I.R.C. Sec. 865(d).
[ ... ]
The Internal Revenue Code sourcing rules are contained in Sections 861 through 865. Income tax treaties can sometimes modify these rules."

- ... 00,00.html

So if Canada and the US has a tax treaty (which we do), the tax rules are different than say, if there were no tax treaty.. ? Again, N number of rules for n number of countries where BatchPCB clients are located. Maybe Canada has an agreement to charge tax on royalties where Norway does not. Why should Batch research every international tax treaty so you can make $15-20 - and allow the possibility of stating pity battles with the tax man?

In all honesty, if your product is that great and has a re-sale market, you should have NO PROBLEMS AT ALL selling it yourself in your own jurisdiction.

EDIT: To clarify, FDAP is an acronym for Fixed or Determinable, Annual or Periodic. (Royalties would be determinable by the amount of boards sold.) NRA is a Non Resident Alien, "In general a non-resident alien is an individual whose permanent residence is outside of the United States and who is not a U.S. citizen." i.e. you or me. And for the record, The Canadian-US tax treaty states that any income I make in the USA while living in Canada MUST BE REPORTED by the IRS to the Canadian Revenue Agency, income taxes are applicable. If no reporting took place, I couldn't be subjected to the income tax bill as the Canadian Revenue Agency would be ignorant to the fact I had US income. There is no reason Norway would be different. I'm sure your government wants the money just the same as mine does.

Personal feelings: US tax law is a bit strange. My understanding is Americans still have to pay some percentage of income tax on income made outside their own country if they're a citizen, even if not residing in the USA. ALL lottery/gambling winnings in the USA are subject to income tax. If you're a "professional gambler" in the USA, you have to keep a log of your gambling winnings/losses/times/locations so you can be taxed accordingly. (Seriously.) Marijuana in the United States was initially legal only with a tax-stamp scheme. (Buy a stamp to possess marijuana, but you couldn't get a stamp without marijuana creating a legal-black-hole letting them toss you in jail for tax fraud instead of drug charges.. ). Some states, i.e. Florida residents, pay 0% state income tax. (?!)
Just leave it alone, start your own company in your own jurisdiction. :roll:

Final edit: in response to your "think geek gold" or whatever rewards points, please review:
"You must live in the U.S. or Canada.
(This is mainly because the laws regarding reward programs vary significantly from country to country and we can't manage them all without going insane! Sorry, no exceptions!)" -- you're just violating their terms of service and getting away with it. Nicely done.
By KreAture
First off, the geek points are different to the jinx gold but in essence they are valid as payment and as such I have to pay tax on the item as it crosses the border to me. However, they simply record it as income in their end.

But, to the point. You are wanting to misinterpret. However you actually sourced the exact docs I wanted.
You are just confusing income and wages with the royalties or maby sales comissions.
It's the recipiant that has to report the single instance royalties or comissions and pay taxes on them as pr that Schedule C-EZ IF he is under that law. Similarly however most countrys have same type of law with just minor changes in wording.
I too would have to report in the royalties and pay tax on them, however it is not BatchPCB's responsibility. They don't have to know anything about what forms I need to fill out at all.

Now to Apple...
Again you want to misunderstand me. I ment that Apple does not report YOUR earnings to YOUR government.
They report THEIR earnings and THEIR added expenses in relations to YOUR earnings, true. But that is so that they don't have to pay tax on the royalties to you. I am not sure how much is deductible or what goes where on your tax returns but the principle is they have to report the money as something or they have to tax it as their own pure income which it is not. They however don't have to report to the government of every single contry they send royalties to exactly who is getting how much and when. Their books, sure, but they are not doing any app dev I know's books that's for sure.
I think a LOT of app devs thought that Apple would do their taxes and reporting for them and were quite surprised by the penalties when they got em due to reporting their income.

Anyway, maby not royalties is the right name for this in the us, maby it's sales comissions. I do not know as I don't really speak english natively, but the bottom line is this sort of thing is in fact the recipients responsibility and all sparkfun needs to do is deduct it from their earnings and keep track of any interests. Possibly it get's hairy if the interests on comissions not payd out due to minimum lump sum payments is to fall back on BatchPCB but otherwise it shouldn't be that bad.
By indes
I don't WANT to misunderstand you, but you are throwing around a lot false information and conflicting ideas.

It states in the documents linked (that you clearly didn't read); Income and wages are to be reported the same way as royalties. (Thus, Royalties are a form of income and are taxable.)

The IRS must get a report of the income made in the USA - if its my income, your income, or the man on the moon's income - as stated by US federal law. If the source is from the USA, then it must be reported to the IRS. Even if you don't live there and are making money there. Period.

J!nx GOLD or whatever it is cannot be compared to cash royalty. You're not selling items on J!nx. They're not licensing your items. They're giving you discounts based on past, personal spending. It's NOT the same. In fact, if you buy a diablo shirt, J!nx will have to pay Blizzard, the owner of the copyright, who will then have to pay tax on that royalty. J!nx has to tell the IRS they paid Blizzard. Blizzard has to report/declare that income.

"Which products can I use J!NX Gold on? EVERYTHING at except Gift Certificates. " Why? CASH VALUE AND TRANSFERABILITY. If you give me something similar to cash, it's taxable income in some countries. Plus that gold is only good with J!, Thus, it can be said J!nx gold has 0 cash value. No value = Not taxable. Try having them exchange the gold for real money...

I didn't say apple tells your local government about your earnings - I said apple tells the IRS about your earnings, collects and files income tax for you, and as it is US sourced - then discloses your earnings in the USA to your local government; depending on treaty.

"maby not royalties is the right name for this in the us, maby it's sales comissions. " Commission is income and has to be reported and taxed. Ask any real estate agent anywhere in the world. If royalties weren't taxed, I'd be a real estate agent, selling houses, paying 0 income tax as any revenue made is royalty based.

I hate to break it to you, but anything of any value "earned" in the USA must be reported to the IRS.

If you can convince BatchPCB to sell your design and give you "credits" (that are non-transferable) towards future orders, where credits have no cash value - then its entirely possible for Batch to do with little/no tax implication.
You wouldn't be making an income, they'd have nothing to report.

Please understand, this is nothing personal against you - it appears to be your misinterpretation of tax law in the USA.
By KreAture
Umm, I never said it doesn't need to be reported I just say that american companies paying up to foreign persons don't have to file those foreign persons personal taxes.

You yourself say: "I didn't say apple tells your local government about your earnings - I said apple tells the IRS about your earnings, collects and files income tax for you, and as it is US sourced - then discloses your earnings in the USA to your local government; depending on treaty."

The fact is, they do NOT do this. Apple does NOT deliver you any 1099, nor a 1040.
Even if you are in the US it is still your sole responsibility, and burden, to file all the correct forms to the US IRS.
I have to do the same to the norwegian tax authorities for my earnings on Appstore... No difference. Not much work for Apple.
By KreAture
Btw, My friend doesn't seem to have any issues with iStockPhoto or any other sites selling his pictures for him. Most of them are US based. So, it looks like it is not only Apple that has no problems with this, but T-shirt artwork sites, stock photo sites and multi-level marketing firms.