From a Smashwords email re: VAT pricing: 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 retailers 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/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, youll notice a 17% drop in your per-unit earnings for sales in the UK and Europe. By doing nothing, youre 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 theyll 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. Its not a recommendation we make lightly because your per-unit earnings will drop. It also means that the retailers cut, as well as Smashwords commission, will also drop correspondingly. As one Smashwords retailer told me, Were 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 were 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 Amazons 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 Amazons price-matching robots. Or, you choose to opt in to the Smashwords VAT Manager tool, well adjust you prices so they approximate Amazons 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/dashboard/vatManager Please carefully read the instructions on that page before making your decision.
Posted on: Thu, 01 Jan 2015 12:25:14 +0000
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