This agency model thing isn’t simple, not by a long shot. Want to know why some books aren’t showing up in ebook stores yet? Well, this is one of the reasons. From the Diesel eBook Store blog:
April 2010 will not be fondly remembered by eBook aficionados. First, most eBook retailers have had to withhold several thousands of books from the top five NYC publishers due to the decision of the now infamous Agency Five or “Gang of 5″, as some have referred to them. Now, another green-eyed monster has reared its ugly head just over the horizon – State Sales Tax. This means that Diesel will be required to collect sales tax on all of the A5 books it sells, once those books are reinstated. So basically, whenever someone purchases an A5 book, we will be collecting sales tax and then forwarding it to the publisher, from now on. There’s a slight problem with that, however. Digital transactions aren’t as clean cut as a candy run to your local convenience store. For example, if a Boise resident is vacationing in Acapulco and decides he or she is in the mood for a Diesel download, who’s going to be doing the taxing exactly? The billing address says Boise, but Idaho is far from sight and mind in this case.
We’ve also learned a new word – “nexus”. Most publishers have some sort of geographic business presence in each state, which means they have a “nexus” in that area, and are thus required to pay sales tax. It’s the reason you pay sales tax if you buy from Sears online, for instance. Chances are there’s a Sear’s bricks ‘n mortar near your neighborhood, in other words. With Agency, the publisher – not the retailer – now becomes the seller of record. Since we are an agent in the transaction, that means we have to do the collection. (Interestingly, one of the A5 publishers we talked to today said that they think they are required to pay sales tax because they have a very large sales team, and therefore “sell” everywhere.) At this moment, we have not received confirmation from all of the A5 publishers as to whether they will be charging sales tax in each US locality.
But the plot thickens. Sales tax rates vary by county, municipality and, in some cases, subsections within a given municipality. So, if a customer from Plano, TX, let’s say, buys an eBook, he or she will be charged the Texas rate of 6.25% plus the Plano county rate of 2%… we think. Our bean counters are working out the details, as we write.
Once again, however, the biggest losers in all of this are the customers who will be forced to hand over more $$$$$ for their eBooks. That’s what truly concerns us.
Paul, You are correct on Texas. I don’t think the publishers have a clue as what they have gotten themselves into. In Texas the rate is different in every city, not just county. Here are some of the headers from them that I have to work with every year.
SPD2Name 2 and 3 also different tax rates
TransitTax and 2
You have to fill their forms out for them. It is not a set rate for each city, county, Special Purpose District, Mass transit. Every one is different.
I live in an unincorporated area. My tax is 6.25 and yet I will be charged for example by amazon for 8.25. Who gets my other 2% ? of which I shouldn’t have to pay. The texas forms are in pdf which you have to fill out by hand or online. And every year they send you pages from the year before that list the cities you paid. I got over 125 pages one year which I promptly threw away because I don’t exactly sell to the same city or county every year.
Say for example that Hachette’s presence is in Houston. And say I live in Dallas. Houstons rate is 8.25 but they sold to me and my rate is also 8.25. They have to fill out the forms as if I am in my county not Houston. Otherwords they will need my address and county to verify so that my county gets its money and it is not sent to Houston’s coffers.
I can imagines the audits should Dallas complain that they didn’t get their .01 percent for the city and their .01 percent for mass trancit. Dallas covers 5 counties and Houston 3 counties. The spreadsheet for cities and counties tax covers 2509 cities. Sure hope they have fun! It’s not like they can just turn in 8.25% to the state and hope for the best. They have to itemize each and do the calculations for the state and it has to be done every quarter.
They reap what they so. No pity from me. Let them col,lapse under the weight of their stupidity and greed.
Apparently, there are 11,000 distinct sales tax jurisdictions in the US.
That means they need to track and document sales and maintain separate distribution channels for each one.
I guess that’s why they raised prices 30%; they need that much to pay for the added administrative overhead they’ve taken upon themselves.
Last I checked we’re still a free market society and Publishers are able to and obligated to on behalf of the authors, to maintain the value of their titles. It’s just good business. If you don’t like it, go to Google books and get all the free content you want. To be sure publishers weren’t really thinking through the logistics of this Agency thing, but then neither was Apple.