Monday, 16 July 2012

Do you need a US Bank Account? EIN? Registered Business Name? License to publish on Amazon?

After months of research, I decided to self-publish my book on the Amazon Kindle. I designed my cover page myself, and I spent a week learning HTML just so I could convert my book to .prc format (using Mobipocket Creator). But just as I was about to publish, I came across this bit of information on the KDP FAQ: 


"We'll pay you automatically by Electronic Funds Transfer (EFT) to a US, UK, or EU bank account"


As a Canadian, I was shocked. How was I to get paid? If I had continued reading, I would've noticed "or mail a check" on the same page, but I was too shocked to pay attention. After a google search, I discovered that this was in fact true. I do not need a US bank account to get paid in Canada. They will mail the check in USD, and it can be converted at the bank. Simple.


But this opened up a whole new bag of problems. I discovered that (as a foreigner) I was subject to a 30% withholding tax by the IRS on all Amazon royalties I received. So not only would I be taxed by the Canadian government, but also by the US, which would no doubt leave me with very little income! The only way around this is to apply for exemption as a result of a special tax treaty between the US and Canada. But in order to do this, you need a TIN (Tax Identification Number) for Amazon to process your exemption.


There are two types of TINs: An ITIN (Individual Taxpayer ID Number) and an EIN (Employer ID Number). Until very recently, many people believed that the ITIN was required for self-publishers on Amazon. I had heard horror stories that involved filling out the ITIN form and required documentation and months of delays and rejections. The prospect of doing all this tedious paperwork and waiting months for approval was NOT appealing, and I was deeply saddened...for a few minutes. Then I stumbled across Roz Morris' blog post suggesting that all you needed was an EIN, which could be acquired within minutes. Catherine Howard's blog post confirmed it! You don't need an ITIN at all! An EIN is just fine!


There is just one catch: you need to have a business. This involves registering a business name (which usually costs anywhere between $60-$100 depending on your local laws) and applying for a business license (again more fees and form filing). But this is not necessarily the case... If you visit the KDP FAQ you will find the following: 


"For non-US persons, a TIN may be an EIN (for individuals and businesses) or an ITIN (for individuals only)."


The reason individuals qualify for an EIN is because the majority of self-publishers are publishing as individuals, not as a company. You DON'T need a company to publish on Amazon. When you call the IRS  (1 267 941 1099) for the EIN number, just let them know you are self-publishing as a sole proprietor.


This brings us to the next issue: If you are a sole proprietor, do you need to register for a business name? Well, that depends. If you are publishing under a different name, then yes you do. If you are publishing under your own name, then no you don't. (NOTE: the name you publish under on Amazon is different from the author name, so you can still use a pseudonym to conceal your identity, if you wish). Just tell the IRS you are a sole-proprietor publishing under your own name, and they won't mind. That's what I did, and I had my EIN in under five minutes (excluding the fifteen minutes I was on hold).


Do you need a business license as a sole proprietor on Amazon? No. Business licenses only pertain to the jurisdiction in which you live, so the IRS and Amazon do not care if you have one, and they will not ask. Check your local laws to make sure, but in Ontario, a business license is only required if you are servicing customers directly or are required to collect taxes for the government. Since Amazon is distributing your books for you, you are not servicing customers directly. Amazon handles the business side of publishing for you, so a business license is not required.


There you have it, you can have an EIN in under five minutes without paying a dime!

9 comments:

  1. Thanks Adrian! This was exactly what I needed to know!

    Rob

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  2. What an excellent, well written article! Thank you for all the information. You may have just saved a lot of people a whole lot of time and headache! Kudos to you! Thank you!

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  3. Hello. I've just got to the stage where I am ready to publish on Amazon and have just discovered all of this. Thank you for your article.It was well written but I'm still a little confused though. I'm a British citizen and have no business bank account so can I still apply for an EIN number? I was under the impression that to get an EIN number that I had to class my business as a company which means I would then be an employee of that company, hence getting the EIN number. Since I don't have a business bank account and am a sole proprietor can I still get an EIN number or do I have to apply for an ITIN? I'd really appreciate your help on this matter.

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  4. Hi Melanie, sorry for the late reply. I applied for an EIN as a sole proprietor. It was really simple. I think if you follow these instructions you will agree. I didn't have a business. But the EIN applies to individuals as well as businesses. You don't need a business bank account to self-publish. When you call them, just let them know you are publishing as a sole proprietor. Hope that helps!

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