We publish and sell Kindle books on Amazon and since we live and work in Australia, we have to deal with withholding tax issues. This has always been confusing for us and still is to be quite honest, but until recently we have never had to pay withholding tax. We would just complete the W-8 form and just state we didn’t live or work, or hold a business entity in the US, post it in to Amazon and that would be it.
However, when our latest cheque came through from Kindle, we noticed that they had taken out 30% of the earnings. When we went and checked the last 4 cheques, we realized that yes, they had been withholding some of our money and we just hadn’t noticed before. At this point, we felt it was time to investigate this properly and figure out what we needed to do. So the following information is based on what we did.
DISCLAIMER: Bear in mind, that this is just what we did and may not apply to you. Each country is different and each individual is different…PLUS, we aren’t experts in tax laws by any means…so make sure you do your research first to make sure you are doing the right thing.
Step 1: Get an EIN or ITIN
This part wasn’t very clear for us. We kept reading on forums that you needed to get an Individual Tax Identification Number (ITIN). Since we are a partnership, we didn’t think this applied to us. Eventually we found out that we needed an Employer Identification Number (EIN).
So if you are an individual you will need to complete Form W-7.
If you are a business of some sort, your will need to complete Form SS-4. And yes I know it does say Employer Identification Number (and we don’t employ anyone) but it is the correct one…at least it was for us.
As far as I can tell, the W-7 form needs to be mailed in. The SS-4 can also be mailed in, but it is so much easier just to ring them (+1 267 941 1099). We used Skype for this because it isn’t a toll free number and would have been quite expensive otherwise. The whole process was extremely easy. Make sure you have the SS-4 form in front of you already completed so you can answer their questions promptly. They will give you the EIN immediately once completed and will send out documentation in the mail.
Step 2: Complete the online form in your Kindle KDP account
Once you have your EIN or ITIN, you will need to login to your KDP account and complete the Tax Information section. This can be found by clicking your Account at very top right of the screen.
When it came to the part where it asked if we wanted to claim treaty benefits we ticked YES. We had always selected NO at this point and it wasn’t until we researched this that we realized that YES was the correct response. It will ask you to enter your ITIN/EIN and once done it will tell you what the amount of withholding tax will be. Once that is completed a message will appear stating that your information has been submitted and will be reviewed by the IRS. At that point, you will not be able to make any changes so ensure you have entered the correct information to begin with.
We’ve been in this business for a long time now…I guess you could call 10 years a long time…and as a result, we have built up a whole lot of ‘stuff’ that needs sorting out. When I say ‘stuff’ I mean websites. We just have too many of them and then there are the domain names – we probably have about 100 of them…most doing nothing but just sitting parked for maybe one day when we get around to using them.
Stupid really…we know we are never going to get around to it because we have enough to do already. We don’t want to build more and more websites. We have enough trouble keeping track of the ones we have, plus we created new ones after we were penalised by the Google animal updates.
In other words we have a lot of stuff and it needed sorting out…we needed a spring clean. So we have been spending the past month or so doing just that. Our main task has been moving most of our old sites over to one hosting account. We had 4 hosting accounts and we really didn’t need four. One of those accounts was a reseller account so we decided to move as many sites as possible over to that account. We figured it will make it a whole lot easier to keep track of everything.
So far we have moved 23 sites over. These are mostly our old sites (pre-Google updates) that we no longer really work on. We don’t want to get rid of them though as despite the Google penalties they still make us money. Just to give you an example, for the first two days in December we have made $338 on Amazon and $174 with CJ for those old sites. We have other affiliate accounts so we may have made a little more than that…I just haven’t checked.
So while they are still making us money, we aren’t about to get rid of them. We just update plugins etc as needed and every now and then we will go in and freshen some up by adding content or changing the theme…but most of the time, we really do nothing to those sites.
Then we have some new sites. We could probably classify these are Type A and Type B. Our Type A are sites that we created because we are just interested in the topic. For example, we started a gardening site because we are both into that at the moment and an ASMR site…if you don’t know what that is just Google it. So all of those are going over to our reseller account as well.
Our Type B sites are ones we created to replace our old money making sites. These are our product sites although we are tending to move away from the product based sites and moving towards more generic type sites. And when we say ‘sites’ there aren’t a lot of them. We don’t want to go back to having 20 or so sites that we have to work on.
These sites are going to stay on their own hosting account separate from the rest. We’ve been burned in the past from people finding out what our sites were. They would either copy them completely, or pick out reviews that we worked hard on and use them on their own site, or they would constantly check our site stats and tell us that our system didn’t work if we suddenly had a drop in traffic…blah, blah, blah! We still get those sorts of comments to this day.
So those sites are hidden…WHOIS made private, different domain name account, different hosting account, different Amazon account etc etc.
We’ve also moved the Affiliate Blog site over to the reseller account. In a previous post I wrote about how we moved the site to WPEngine hosting. We were happy with the move and would have liked to have stayed with them but it really wasn’t cost effective in the end. This site gets a lot of traffic and we would go over the allowable traffic usage each month. (Note that WPEngine also includes bot traffic in their calculation). This meant paying an extra $10 or $15 a month in fees.
If we moved up to the next level it would have been $99. That wasn’t a problem but we would have only been able to add another site or maybe two before we’d reach the traffic limit again. So in the end, we decided to move Affiliate Blog over to our reseller account.
There were also some sites that we trashed completely. They weren’t making any money and we knew we would never get around to working on them again. I think we trashed around 5 sites – I would have liked to have trashed more but like I said before, we aren’t going to toss away sites that are still providing us with an income.
Then there were the domain names. We just had way too many and they needed to go. So for at least 10 of them we just let slide and no longer paid for the renewals.
For about 30 other domains, we put them up on Godaddy Auctions to sell. They have already gone through a 7 day auction with no sales but the best thing about Godaddy domain auctions is that you can relist as many times as you like and it doesn’t cost a cent. So what we are going to do is just continue to relist them until they either sell or expire. None of them are terribly exciting so we don’t expect miracles here but if they sell then great!
So all in all, it’s been worth the effort. We still have a number of websites to transfer over so we are focusing on that at the moment but once that is done, we are going to feel a whole lot better having everything organised.
Over the past couple of years we have made it a habit to reveal our income for our November-December Amazon sales but as many of our regular readers know we decided to no longer do that for various reasons. (You can read the reasons why here). However, we know that hearing about others successes is a real motivator – it helped us in the early days when we first ventured into this business and were trying to make a living from it – so we thought we might tell you about our best day on Amazon for November and a little about how December is going for us.
We mentioned in one of our recent newsletters that we saw a slow start to November for Amazon sales. Last year it took off with a bang and didn’t stop until well after Christmas. This year it looks as though a lot of people are struggling with the current economy in the US and were waiting for the sales to start in order to get a bargain.
Fortunately, however, we did see things start to pick up around mid November and we have had some record days for both earnings and orders.
Our biggest day overall for November was Cyber Monday which was surprising as I was expecting that Black Friday would have been a better day. As you can see from the stats below we did actually get more clicks on Black Friday than we did for Cyber Monday but the Cyber Monday shoppers were a little more keen to shop I guess, resulting in 263 orders for that day.
We’d love to be making over $1000 a day on a permanent basis from Amazon. It is doable of course….there’s no limit to what you can make from affiliate marketing. We just have to make it our goal for next year.
Our Year in Review
This year has been an interesting one for the both of us with a few different personal issues taking up a bit of our time particularly for Wanda. Fortunately this business allows us to take time out whenever we need or want to. This is one of the biggest benefits for making a living online – in my opinion the freedom you get is worth much more than the money.
We’ve also been caught up in a lot of different projects this year taking us away from our Amazon sites. We keep coming back to them and then for some reason get dragged away to something else. Not sure why that is because we are all for staying focused.
Our problem I think is that we want to diversify but in doing so we go back to working like we did when we first started out. In other words, we work on too many things at the one time and don’t focus enough. In a way, it has been good for us to do that as I think we needed a break from the Amazon sites. It can get a bit much doing the same things year after year so having a bit of project diversity has been fun. But if we are going to keep working on diversifying we need to focus on one thing at a time. We all know how easy that is right?? ;-)
We’re both looking forward to next year. We love this business and can’t wait to see what next year will bring. Let’s all hope that the economy picks up and we all have a happy and prosperous new year.
Amazon seem to be sticking to their guns with their latest California update. For those that aren’t aware of the changes, recent tax laws have resulted in Amazon terminating the Amazon affiliate accounts for those affiliates residing in California.
UPDATE TO THIS POST – OCT 2011 – Amazon have re-opened their associates program for California affiliates. See the following quote from Amazon:
California Governor Jerry Brown recently signed legislation repealing the law that had forced us to close the program to California residents. We are pleased to invite all California Associates whose accounts were closed due to the prior legislation to re-enroll in the Program. Associates who re-enroll will retain all prior account settings (login, Associates ID, payment information, etc.).
This isn’t the first state to have their accounts terminated. So far residents in Colorado, Illinois, North Carolina and Rhode Island are also no longer able to to participate in the Amazon Associates Program.
For those living in the states that have been affected by the tax laws here a few suggestions. First of all, we can’t give you any specific legal advice but there have been many who have opened up companies in other states…legally. So you might want to login to your Amazon affiliate account and go to the Discussion Boards to see what others are saying about that. There is certainly a lot of discussion going on in there and lots of suggestions.
Now I’m not going to go into the good and bad of these tax laws and whether or not Amazon is going about things in the right way or not but what I am going to do is go through a number of alternatives that you can use other than Amazon. And this is not just for those who can’t use Amazon.
Even for the rest of us that are still able to use Amazon it is worthwhile diversifying a little and trying new merchants. Of course Amazon converts extremely well but in some cases you might have a nice little niche that will work just as well with a very niche merchant. And some of your readers might prefer buying from a very niche merchant who can answer specific questions and who knows their product in detail. So if for some reason Amazon isn’t converting well for you and you do have a very specific niche then you might want to try some of the networks listed below to look for a merchant who heavily targets your niche.
So, if you are looking for alternatives to using Amazon then we can suggest the following. We use all of these affiliate networks on various websites and are all free to join.
Commission Junction (aka CJ) has been around for a long while now. They were were the first network we signed up with when we started in this business. CJ has hundreds if not thousands of different merchants so you are sure to find a one to suit your niche. You will need to get approval for each merchant that you apply to. Some will give automatic approval as soon as you sign up with them and others will want to manually approve you. Don’t be offended if they don’t approve you. There are plenty of different reasons why you may not get approved – just email the merchant and ask if you really want to know. We don’t always get approved.
Look for Overstock.com when you get there as they are very similar to Amazon with a lot of diverse products.
Each merchant in CJ has different commission rates and requirements so make sure you read the terms for each merchant before signing up with them.
CJ is easy to work with once you get the hang of it and they have a ton of product, text and banner links although this is dependent on the individual merchant of course.
The only downside with CJ is that they don’t offer a deep linking tool to enable linking to any page on a merchants site like some of the other merchant networks. If it is offered it is only on a merchant by merchant basis and most merchants we have found don’t provide the service. However, this is not a huge issue because most merchants in CJ provide links to just about all of their products anyway. This is what makes CJ one of the best merchant networks because there are thousands of product links available.
ShareaSale are another merchant network with a lot of niche merchants. ShareaSale is a good network to work with and they allow deep linking for all their merchants plus a heap of other neat tools like widgets, videos and mini-store creatives.
Their ‘Make a Page’ tool is pretty cool allowing you to select a merchant and create a page of products in seconds. All you need to do is add the code to your site and the products appear. You can select how many products to display, and whether you want descriptions and prices to also display as well as a heap of other options. Here’s an example:
Once you have signed up to ShareaSale it’s a good idea to sign up with CSN Stores (soon to be known as Wayfair). CSN are a network of very niche type online stores and we use them on a number of our sites.
Linkshare has been around for a while now and has a lot of merchants but we’re not too fussed on their reporting interface. It started out kind of confusing so we didn’t use them too much. However they have improved over time although the reporting side is still clunky to work with. You are given a site id for each website, which is fine but all records and reports are held under those seperate site id’s so you have to spend time going into each website report individually, there isn’t an overview of all your sites reports. If you only have a couple of sites then this won’t be an issue but, if you are like most of us and have way too many sites then this does become an issue If I was starting out with them now, I would only register one site and consolidate all the merchant links under that site.
They do have a lot of merchants to choose from so are well worth a look. Once you are in the link building phase LinkShare is easy to use and getting links is no problem. They also have deep linking which is really easy to use and the merchants also provide plenty of products, text links and banners for you can directly link to.
Google of course has to be in on everything so they bought out a private affiliate network and made it all their own. The Google Affiliate Network isn’t too bad but it’s a bit clunky considering this is Google we are talking about. You would expect it to be a top notch system but in our opinion, it’s not. However, they do have some of the bigger merchants like KMart and Target for instance.
Wanda reckons that Pepperjam is her favorite. She is the one who spends the majority of the time on our niche sites so she would know. You can create mini-stores, deep links and tracking ids and it is very easy to use.
Each of these merchants make your life really easy when it comes to getting products onto your page. One thing you do need to watch is for when a product link has expired, this is not always obvious when you pick up the html from the merchant, and only some have the expiry date written somewhere so that you know it has expired.
There are plenty more but those are some of the best ones to start with. Let us know which ones you use in the comments field below.
This post is a guest post written by Thomas from the 7 Pillars of Selling Online.
“Opportunities are everywhere.”
I sure wasn’t confident about that a few years ago…
Starting a business was something that I had always wanted to do, but I didn’t see how I could do it.
Thinking it would be a good idea to build entrepreneurial skills, I left my first job out of college to get some sales experience. People thought I was crazy…and they were right.
I got a lot of experience, but not a lot of sales. It was not for me. I really needed something else to create an income for my family.
I discovered almost by accident how to sell on Amazon. It changed everything, and I started to believe once again that I could make it.
Opportunities abound; taking the first step is easy…it’s what a lot of people do…but it’s knowing what to do for the following steps that makes all the difference.
That’s when you find success, and you don’t need a fortune or need to be “well connected” to get started.
It doesn’t take much to get started selling on Amazon, and that’s what saved me because I didn’t have a lot to start with.
Had I first tried to create my own ecommerce website, I would have spent hundreds (more like thousands) of dollars just to get started– not to mention committing to a product line, buying product, paying for storage…all before knowing if the product would sell. What a mess!
Starting out selling on Amazon is easy because you can start with just one product.
That’s how I started…just one product, then two, then three…you get the picture.
It was easy to build from the ground up because I didn’t need an upfront investment in an expensive ecommerce site, SEO, and trying to get traffic.
The traffic is already there on Amazon; that’s the beauty of it.
My business selling on Amazon has no employees–just me, and my wife helps out too sometimes.
I share that only to show that it is possible to start small, with one product, and slowly build your business with baby steps until it becomes as big as you want it to be.
FBA…those three letters are like Magic.
Imagine building your business to the point of shipping 20 orders a day. That’s fantastic–and a manageable amount.
But what happens when the Holidays come around and you need to ship hundreds of orders per day, and then deal with returns, undeliverable shipments, and deadlines…ouch.
That’s where the magic letters come in: FBA. They stand for Fulfillment by Amazon.
Here’s what Fulfillment by Amazon (FBA) means:
What this means for you:
Now, you don’t have to use FBA for your business, and it’s not available in all countries, but if you have the option, it’s how you can build your business fast.
But what sort of products should you choose to sell on Amazon…
Imagine shark infested waters where any potential piece of food is torn to shreds amidst the thrashing and biting…not a very happy place.
Now imagine the spacious, pristine, blue waters off the coast of Hawaii (or your favorite tropical paradise). There are miles and miles of open, clear, clean water.
If you’ve read the book Blue Ocean Strategy you’ll recognize these two different ocean waters as “Red Ocean” and “Blue Ocean.”
Red Ocean (with the sharks) is fraught with cutthroat competition. It’s hard to make a dime here.
Blue Ocean (imagine your favorite tropical paradise) is open for expansion with no relevant competition.
Amazon has both oceans, and if you want to keep all your fingers and toes intact, it’s important to play in the right ocean…
The strategy is simple:
Sell products that people want and other sellers can’t or don’t offer.
Amazon creates one page for each product available on its site. All sellers that sell the same product are tossed onto that same product page.
Notice the seller counts when searching for a product on Amazon.com: “66 new” and “145 used” placed next to the product name.
Those numbers show that 66 different sellers are selling that product new, and 145 sellers are selling it used (this smells of “Red Ocean” big time).
The sellers are competing for the top spot called the “Buy Box” which is home to the “Add to Cart” Button.
The seller with the best price and history gets the Buy Box (the automatic sale) when someone presses “Add to Cart.”
The other sellers get listed off to the side or on a secondary page.
With all those sellers selling the same new item, all they really have to compete on is price, and the price gets driven down to where no one is making a profit.
So what can you do?
There are two types of products you can sell:
If you make your own products (or have them made for you), as long as they’re not a copy of some other product, you’ve essentially created a “Blue Ocean” for yourself. There is no competition on the Amazon product page you would create.
If you resell products made by someone else, check to make sure the products are not already on Amazon with a bazillion other sellers selling the same thing.
The items you decide not to sell can be just as important as the ones you decide to sell because you’ll be spared the headache of an unprofitable product and be able to use the money on profitable products.
As for what types of products–you can sell all sorts of products on Amazon. I prefer to sell non-media items (products that are not DVD’s, Music, and Books).
You can absolutely make a living selling books (used and new) on Amazon, but that just didn’t interest me as much. I like being able to sell products for $30, $50, or $100 a piece, and that’s hard to do with books.
The product possibilities are endless, and are often right in your own backyard. You’ll be surprised how many companies there are near you that make products that are not listed online.
The key is to just take it one step at a time.
Since 2008, my full time income has come from selling products on Amazon, but it’s fun to explore new opportunities.
I looked into additional income streams and found Paula and Wanda’s site. Right when their Amazonian Profit Plan went live, I bought it, and revamped a small review site I had on the side that was making only a few dollars.
With their insights, our review site provided extra income we used on vacation for a helicopter tour overlooking the crystal clear, blue waters of Kauai, Hawaii. It was breathtaking!
The point is, once you’ve built up one business, it’s fun and rewarding to explore additional options.
If you sell products on Amazon as your only income for instance, build an affiliate business.
If you have an affiliate business, sell your own products online.
Diversifying so you’re not dependent on just one income stream not only safeguards against risk…it’s a lot of fun!
Here’s to your success.
Thomas John makes a full-time living selling physical products on Amazon. He is the founder of the 7 Pillars of Selling Online where he shares his story and teaches how to sell products online. He invites you to discover more about selling on Amazon.