- Spoonflower is asking me to complete tax information, which is something I’ve never had to do on other POD sites. What does this mean?
We are being told by our tax advisors that we need to collect tax information from all designers who make their work available for sale on Spoonflower. This requirement came as a surprise to us, and we are complying with the advice because we believe that we are required to do so by the IRS (the tax authority for the US). What this means for designers who make their designs available for sale through Spoonflower is that, if you earn money through selling on our site, we will need to report the Spoondollars we assign to you (over $10) in an annual statement to the IRS (Form 1099 or 1042-S).
- What Tax information do you need and How do I submit it?
We are required to collect Form W-9, which is the form on which you report your taxpayer ID number: either your Social Security Number (for an individual US citizen) or your Federal Tax ID (if you are a US business). If you are an individual who is not a US taxpayer, we will ask you to complete the Form W-8BEN. You can fill out these forms on the tax info tab of your Spoonflower account page, or download a copy of the Form W-9 here, or the Form W-8BEN here. The Form W-8BEN-E, a form used by non-US entities (businesses rather than individuals), can be downloaded here. To send us a form you've downloaded, please print and complete the form, then write or type the email address associated with your Spoonflower account at the to and fax it to +1 (919) 361-6376. You can also email any of the forms to email@example.com.
- I have earned a small amount of commission but have only ever used it (or plan to use it) to buy fabric. Do I still need to complete the form?
We are asking every designer who participates in the Spoonflower marketplace as a seller to complete a Form W-9 (for US designers), W-8BEN or W-8BEN-E (for non-US designers), regardless of how they plan to use their Spoondollars. We recognize that this is a hassle and something many of you would rather not do, but it is our understanding that it is a requirement. We would not ask this of you if we felt we had the option not to do so. We are sorry!
- I just use my Spoondollars for ordering swatches and proofing designs, which is part of my business. So I’m actually spending more than I make!
You should consult with your tax advisor regarding whether you are able to deduct swatches for proofing, or other Spoonflower-related purchases, as a business expense. But we remain obligated to collect tax information and, above certain dollar thresholds, to report your earnings to the IRS. If you do not provide your taxpayer identification number via the tax information tab on your Spoonflower account page, we may be required to withhold an amount from your Spoondollar commissions and to pay this amount to the IRS on your behalf. While withholding requirement amounts vary slightly from individual to individual, we will withhold 30% from any seller who has not completed the form on the tax information tab in their account. To release us from the need to withhold 30% from your Spoondollar commissions, please fill out the tax info as soon as possible. Please note that in some cases for non-US individuals, we may need to withhold even with complete tax information.
- What if I don’t complete the form? Can I continue to sell designs and earn commissions?
You will continue to be able to sell your designs but if you do not provide your taxpayer identification number via the tax form on your account page, we will withhold a portion of your Spoondollars earned. To comply with IRS requirements, we will withhold 30% on a transaction-by-transaction basis and pay the withheld amount to the IRS on your behalf. At the end of the tax year, we will provide you with a statement of what we have paid to the IRS on your behalf. The money withheld and reported by Spoonflower is provided to you at the end of the tax year via a Form 1099 (for US sellers) or Form 1042-S (for non-US sellers with US-source income).
- The money I have earned in Spoondollars sits in my account and I have no plans to use it. Do you still need me to complete tax information?
If you plan to continue to participate in the marketplace as a seller, we need you to complete the tax forms regardless of how much you have earned or how you plan to use it.
- I already report any money I make through hobbies as “other income” on my tax return. Do I still need to complete a W-9 and if so, would it change how I report this income?
You should report any income earned from commissions on your income tax. However, we still need to collect tax information from sellers and report the Spoondollars they earn on Forms 1099 or 1042-S as appropriate.
- I would rather not send my SSN via the Internet. Can I fax or mail a copy of this document to you instead?
A lot of people have this concern, and we totally get it. We’re using a third-party to collect the documents called RightSignature.com, which uses advanced encryption technology. You can see that company’s security help page here. The personal information you provide on the form, apart from your name and address, will not be held in the Spoonflower database at all, and will be accessed only by our financial team when and if they are required to report the data to the IRS. If you wish to submit via fax, rather than through the electronic form, please print out the relevant tax form and write or type the email address associated with your Spoonflower account at the top of the form, then fax it to+1 (919) 361-6376.
- I live outside the US and do not understand why the IRS wants this information from me. I pay my taxes in my own country. Why do I have to provide this information to the US?
The Internal Revenue Service (IRS) requires Spoonflower to report all the money it pays to non-US persons earning US-source income and, in some cases, to withhold taxes from the amounts it pays out. In order to comply with the IRS requirement to report and withhold, we need you to complete the W-8BEN or the W-8BEN-E. Payments to you for use of your designs (i.e., royalties) are considered to be US-source if the designs are used in the US. Please note that when you complete the W-8 form, there is a field where you can note if your country has a treaty with the US that reduces or eliminates the obligation to withhold taxes from your payments. A chart showing treaty rates for royalties by country is located at page 55 of IRS Publication 515, available at www.irs.gov/pub/irs-pdf/p515.pdf.
- Why is Spoonflower doing this now?
As you may know, Spoonflower has grown over the years from a scrappy, tiny, under-funded startup with a small number of customers into a fairly substantial (but still small and friendly!) company. There are many things we’ve learned the hard way during our journey. People with more experience and knowledge than us have explained these information reporting and withholding obligations to us and are helping guide us through the process of making sure we are doing everything correctly.
- Can I choose to make my designs available for sale without earning commissions?
Interesting idea. We may need to develop this option, but for now it is not possible. You can still make your designs public without making them available for sale.
- Will I be taxed on Spoondollars given to me by customer service in lieu of a refund or for some other reason?
In general, if our customer service team gives you Spoondollars, they are not considered income and will not be taxable. Please consult your tax advisor if you have questions about specific credits or compensation.
- So they’ll take out the taxes every month, quarterly…? I take out my own taxes anyway, so just wondering when and how often.
Spoonflower will withhold taxes from Spoondollar commissions at the time they are credited to your account in the following circumstances:
- We will withhold up to 30% of commissions in cases where a designer/seller is based outside of the US and sells designs for use in the US, depending upon whether the designer has made a valid treaty claim on their W-8BEN or W-8BEN-E form.
- In cases where a US-based seller with Spoondollar commissions has failed to complete a W-9 or otherwise provide us with a TIN, we will withhold 30%. Once you complete the requested tax information forms, we will no longer withhold taxes from your Spoondollar totals
- I run a business outside of the US. It looks like the W-8 is for individuals; is there another form I need to fill out? When filling the form, it asks for our birthday but we are a company, not an individual, so do not have a birthday date. How should we proceed?
If you are a non-US entity rather than an individual, please use form W-8BEN-E, which can be downloaded here. If you wish to submit via fax rather than email, please print out the relevant tax form, write or type the email address associated with your Spoonflower account at the top of the form, then fax it to +1 (919) 361-6376. If you would like to email it to us, please email it to firstname.lastname@example.org.
- If you withhold taxes from my commissions, how will this impact my Spoondollars reporting?
Hang on, it’s complicated. Spoondollars earned become taxable income only when they become available in your Spoondollar account, which is 30 days from when a commission-generating sale takes place. If you have not filled out your tax forms, then we will withhold 30% from your Spoondollar commissions as they become available to you, 30 days following the sale of one of your designs. Because you are taxed on income earned within the space of a calendar year, we will actually report (on your 1099 or 1042-S) Spoondollars that became available between January 1st and December 31st, which will reflect commissions on sales that took place between December 1st and November 30th. The IRS does not consider payments to have been earned until the money becomes available to spend. Hope that makes sense!
- How will you send me my 1099?
Right now we plan to mail you your 1099 (or 1042-S) via a service called Track1099. We will use the address you provided when you filled out your tax information tab.
- I completed the tax information tab, but you are still showing that you have withheld some of my Spoondollar commissions. Why?
When we withhold taxes from Spoondollar commissions, we are obligated to pay what we withhold to the IRS on your behalf. Once we have paid the IRS, we can't return those Spoondollars to your account. When we send you a 1099 at the end of the year, however, it will show the taxes already paid, as well as the total earnings. Because of that -- depending on your overall tax situation -- you might still get the money back from the IRS once you actually file your taxes for the year. Please consult your tax advisor to understand the particulars of your situation.