Patreon, Kickstarter, International Tax Laws [split]

Would Kickstarter work to help decide what to work on first or if a project is worth your time?

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I’ve thought about Kickstarter, but it’s probably too much of a big one-shot thing. Most of the Kickstarters I know about seem designed to raise tens of thousands of dollars for a single project, whereas most of the games I make would be IFComp-size on the larger side and micro-fiction-size on the shorter side. Patreon, on the other hand, seems more sustainable long-term. It might not attract the big bucks like Kickstarter, but people can support you for years with small donations.

Once more invoking my pipiest pipe-dream world, that would be the ideal for me: to gain enough traction over the upcoming years for steady support that could supplement my main income. Basically, I was in a more secure financial spot around a decade ago, which is why I could spend so much time making all sorts of games. But nowadays it feels reckless to take time off from client work just to write my own personal games. And when I say client work, I don’t just mean games-writing for studios. I’m also an editor. So when I’m not working on games, then I’m usually editing novels or hunting for novels to edit. There’s constant pressure to find more work whenever I have spare time, rather than spending that time on my own writing.

Most of my IFComp-size games take a few months to write and program. Back around 5-6 years ago, I could sit down for like a solid month and just code a game without any stress. But with this in-development game at the 75% mark, for example, I’ve only been able to work on it fitfully for a few days at a time over the past several years. Very slow! If I had enough money coming in from Patreon, though, then I could justify it financially to myself when I take time away from client work to develop my own stuff.

Plus, I’d really like to release all my games for free! That’s what I’ve always done, and I like the culture that grows around creating and releasing free games. But they obviously don’t earn money when they’re free. If I’ve got a Patreon that’s always hanging out in the background, though, then people can throw a few bucks my way whenever they feel like it, as opposed to a Kickstarter which is only live temporarily.

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I wanted to subscribe, but i detest modern practice of scamming VAT;

yes, please explain how a San Francisco based company is, somehow compelled to register for UK taxation and remit it !!

Due to Brexit, the United Kingdom of Great Britain and Northern Ireland will no longer be classified as within the European Union beginning 1st of January 2021.

Once the UK leaves the EU they will no longer be part of the MOSS regime, and so require us to register and remit UK VAT directly to HMRC (UK Tax authority). From 1st January 2021, all VAT collected on UK patron pledges will be paid directly to the UK along with a UK VAT specific return.

If i can find a non-taxed patron account, i’ll do it.

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Sorry about that! It’s all beyond me, I’m afraid. I don’t know anything about how Patreon works in terms of taxes. I might try to set up additional stuff in the future, but even getting this tiny account up and running involved a few hurdles, so it’ll probably be a while before I investigate other options. I appreciate the support though!

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I’m not an expert on British tax law (…he said, with dry understatement) but I think since VAT is a consumption tax, it doesn’t matter where the seller is located if they’re conducting transactions within the UK; the tax still applies (which of course it has to; otherwise everyone would just set up a shell company and opt out of taxation, which is already a big enough problem as it is). The linked page is just about the nuts and bolts of how that happens, which is basically just more of an administrative headache post-Brexit but doesn’t change the rate or anything.

It might be questionable whether VAT would apply to Chandler’s Patreon, given that it’s not a straight exchange-money-for-goods-or-services thing, at least at this stage; from my skim-reading of this Patreon FAQ page, it seems like they provide settings for creators to manage some of that stuff on the back end, for example by marking a portion of funding as for “general support”, which I think is usually not taxable under most VAT regimes (see again disclaimer at the top of this post).

It looks relatively straightforward in terms of how to set things up (they include suggestions on how to account for stuff like providing a private Discord, for example) but of course how those settings interact with the myriad of different international tax laws would require a lot of subject matter knowledge – please see the disclaimer. But anyway that might reduce or zero out the VAT for at least some pledge tiers?

(Oops, Chandler, just saw your reply while I was writing this. Hope this is helpful and not adding another annoying non-paying thing to your to-do list!)

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Ha! Well, it is just a tiny bit annoying, but that’s not you being annoying by any means! That’s the world we live in with tax codes and paperwork, and needing money for basic necessities like food, etc, in the first place. It looks like “general support” is indeed something I should incorporate into the tiers, since that’s the main purpose of the Patreon. I’m not trying to sell merchandise or anything like that. I’ll try to look into this later tonight when I’ve got some more time. Thanks for the link to the FAQ!

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Thanks for your perspective, and i don’t want to start an argument with anyone on here, but i think that’s not how it works;

it doesn’t matter where the seller is located if they’re conducting transactions within the UK; the tax still applies

So you think random locations around the world like Russia and China are under legal obligation to add UK vat if their customer is in the UK. I just don’t think so.

In terms of US law, someone here can correct me, but it seems highly unlikely that there’s a US law that mandates adding sales tax to electronic sales to foreign johnnies then collect said tax at one’s own expense, then remitting said tax to the respective foreign Johnny government and absorbing any currency transaction costs to boot.

On a more positive note, I’ve had another go, but Patreon wont let me log in anymore. I’ll try later.

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It is not the exporting country’s government’s concern about how the foreign taxes are collected, but it is the individual company’s responsibility to calculate, collect and remit taxes to other countries if they want to sell goods or services to that country. It is called customs and borders protection in the US, and other countries have other names for the same concept.

The governments of countries only make overall trade agreements about how they would treat each others exports for different kinds of goods and services, bilaterally or multilaterally. And countries sometimes would revoke such agreements unilaterally, like Trump tariffs and the reciprocal tariffs imposed against US goods by other countries.

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No worries, don’t think there’s an argument, just talking about how these legal regimes are set up! And yeah, as Timur says the basic framework you’re talking about is more or less how it works, though of course there are lots of complexities – US sales tax is emphatically not the same as European VAT systems, and then even within the US different states have very different rules.

But in general, if a company does a certain threshold level of business within a jurisdiction (which might be number of transactions or total monetary amount, or both) they’re responsible for collecting, remitting, and reporting the appropriate amount of revenue (and in some jurisdictions if the company doesn’t do this, the consumer actually also has an obligation to do the reporting and pay the tax themself). This does apply to e-commerce too – creating rules to ensure Amazon was playing by the same rules as other sellers has been a major political issue over the past 5-10 years, though I think the dust has mostly settled on it in the US.

Okay, much as I enjoy tax policy, I recognize I should stop taking Chandler’s thread on a tangent. But if anyone else wants to start a thread on like notice and comment rulemaking or any other legal hobbyhorses, hit me up :slight_smile:

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You’re more than welcome to delve into the nuances and nightmares of the world’s international tax codes in this thread! I know almost nothing about these legal technicalities, but I suppose I might have to learn more if the Patreon earns enough money. Right now the discussion feels rather abstract, since I’m just scraping by to survive. Unless a mysterious benefactor decides to bestow an enormous boon on me, I doubt that whatever I earn from Patreon will have the US and UK governments salivating at their cut of the proceeds. But if a mysterious benefactor does want to grace me with a reason to pay more attention to the tax code, by all means!

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I’m sorry but i just don’t think this is the case. But i would be interested to learn and understand more;

How is it possible that taxes are not the “exporting government concern” but somehow the receiving government’s.

As far as i am aware people are not ruled by foreign governments nor are overseas governments in a position to impose taxes on people that aren’t their own citizens.

I understand that sales tax/VAT is calculated in terms of the location of the buyer and not the seller, but the overall liability is still nevertheless governed by the laws of the exporting nation.

And i think those laws (ie to pay tax overseas) do not exist.

Let me share with you my theory;

Companies worldwide have arranged their accounting affairs so that they do not accrue significant profits. This has annoyed governments which traditionally tax profit and are therefore globally moving to attempt to tax revenue instead of profit.

Tax of revenue is sales tax/VAT.

But the global legal structures for this are not in place, only those within nations or across groups of nations with relevant treaties (eg the EU).

But right now we have a global “hoax” being perpetuated which tries to claim that these taxes apply internationally regardless.

For example when i purchase products from the USA, some companies try to add EU VAT and some do not. This is clearly a guideline thing and not a law. If it were the law, then they would all do it.

But they don’t all do it.

Maybe I have used the wrong word, taxes are a concern for exporting government of course, that is why they are conducting trade agreements after all. What I meant by my remark is that the practical side of the collection of the taxes is the responsibility between the taxpayer and the tax receiver, no country would collect taxes on behalf of another country.

The process is more involved than a tax remit from a taxpayer to their own government obviously. For physical goods it is more trivial, since the merchandise has to enter the foreign country through the customs, so they are taxed there before entering the country.

Let me give an example of how it happens for services in reality: (1) Youtube wants to operate in a country and sell ad spots to the companies there, (2) those companies would like to, in fact they have to report the cost of advertising in their financial reports to their government and their shareholders, (3) the foreign government squeezes Youtube or its parent company to find or set up a representative company in that country and conduct their business through it, (4) the foreign government taxes the representative company.

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Yup, this is my understanding of how this stuff works. I’d just add:

  1. Export, import, and consumption taxes of the kinds we’re talking about here are actually some of the oldest taxes in the world; income taxes are a far more recent innovation.

  2. Just because some people engage in tax evasion doesn’t mean it’s legal (see also: murder).

…and now I’m going to ask @moderators to split this last set of posts out into a new topic, since I think we’re really taking up too much space in the thread and probably not doing much to convince people to back Chandler’s Patreon (which folks should totally do if they’re able!)

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lol I seriously don’t mind! No press is bad press, as they say, and if these are legitimate concerns that people have about Patreon, then it seems fine to talk about them. It still does strike me as a purely hypothetical discussion – or perhaps academic or ideological – since the dollar amount being transacted on this occasion is not exactly a king’s ransom. If taxes are being collected, they’re probably pennies.

Nevertheless! If the moderators see fit to divide the thread, I won’t protest. But I really did intend this thread to be open to talk about anything, so it’s all cool with me.

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@deuslrae Yes, you are quite correct. Also, thanks for asking to split the thread. I didn’t mean to take off on a tangent.

I will make some more points on this subject in a bit.

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Thank you for your detailed answer. This is all very interesting;

Going with your “YouTube” example, it is indeed the case that these companies set up a “representative” in the relevant territories - which therefore attract the corresponding national sales taxes.

I understand the connection. For example, it appears that Patreon have such a representative registration in Ireland which corresponds to EU sales taxes. which would then apply.

But focusing on this idea of “squeezing”;

Why exactly would Patreon (for example) a San Francisco Company be coerced into doing this. Why are they setting up a Irish office. How does it benefit them ?

Is this a banking thing?

That’s because legitimate businesses wouldn’t want to make sales illegally anywhere; it might bite them in the future, if they expand their businesses into other goods and services.

Also since the payments for services and digital goods are usually made by intermediary companies like the banks as you have intuited correctly, the foreign country in principle can block banking transactions with specific foreign companies through their own banking regulations if they choose to do so.

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I used Kickstarter twice to raise money for projects. The first time was to produce a batch of single board computer kits (P112). The second was to pay a programmer better than I with audio to fix the audio subsystem in Unix Frotz. They worked well as one-off things and I would use Kickstarter again for a one-off. I can’t see using it to fund anything ongoing, so I’m pondering, as suggested, signing up with Patreon to get funding to spend more time on IF and other open-source projects.

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Well, there are alternatives. And presumably you’d be recruiting most subscribers outside of the platform in this case. Maybe check the fees?

Along the lines of what I’ve been saying, if they’re going to add sales tax internationally then you will get the net of fees amount of the net of tax amount. So for every $1, they could charge $1.20 with tax. Then charge a 5% fee of the 1.20 leaving 94c. Or something.

Also what about card transaction fees, do they add this on top of their own fee?

I’d very much like to hear from people’s experiences here.

Indeed. So i think we’re getting to the core of the problem. There is coercion from the financial industry where, in fact, there is no real legitimate reason for these companies to have to set up “representatives” overseas. For digital goods, at least.

My claim is this is quite bad news. Companies that could operate their businesses with lower overheads and fees are being “forced” to extort their customers quite unnecessary.