How much % is fair to pay to reseller companies?

edited May 3 in Type Business
Dear TypeDrawers friends and mates,

Since many years that I'm on this business, I never see this topic discussed in anywhere, considering that this times are each time more connected, sometimes I try to imagine how much the big companies cooking in earnings from type designers products reselling, and I have no clue to imagine how that huge monthly, weekly or daily balance could be, I just know about my personal part on this that it's look not much.

In a comparative* way (company vs designer earnings):
  • Monotype 50% + 30% in taxes (since 2016) over "Designer earnings" / Designer 35%
  • MyFonts 50% / Designer 50%
  • FontShop 50% ? / Designer 50%? (I don't know, may be less to designer)
  • Fontspring 30% / Designer 70% (not sure about taxes)
  • CreativeMarket 30% + 30% in taxes (since 2016) over the "Retail Price" / Designer 40%
(*) Not official information

The main question here is how much is fair to pay to companies in a global connected world and how to do this kind of business better for every participant?

Comments

  • Dave CrosslandDave Crossland Posts: 761
    I'm curious, what do you mean by taxes? Is this because the distributors are US companies and make a IRS withholding tax? 
  • That is withholding taxes on sales to a US resident/company by a non-US resident designer/foundry. You are assessed a 30% withholding tax but it can be lower (or none at all) if your country has a tax treaty with the US. The US font vendor has to do this or they will be in trouble with the IRS.

    According to your data, there is no a standard as to how the taxes are computed.  It seems to depend on the interpretation of the font vendor. Monotype's computation of taxes is based on designer share and it is fair to the designer. In the case of Creative Market, it is based on the retail price and it appears that the designer/foundry is subsidizing the withholding tax of the font vendor.

  • edited May 4
    I'm curious, what do you mean by taxes? Is this because the distributors are US companies and make a IRS withholding tax? 
    In simple words, Company earning is 50%, the amount in taxes 30% is discounted from of the 50% earning of "non-US resident designers" (like me and many other ones). So, the final earning for designers are just 35%, this percentage is the amount remains after all discounts that some companies do since 2016.
  • edited May 4
    That is withholding taxes on sales to a US resident/company by a non-US resident designer/foundry. You are assessed a 30% withholding tax but it can be lower (or none at all) if your country has a tax treaty with the US. The US font vendor has to do this or they will be in trouble with the IRS.

    According to your data, there is no a standard as to how the taxes are computed.  It seems to depend on the interpretation of the font vendor. Monotype's computation of taxes is based on designer share and it is fair to the designer. In the case of Creative Market, it is based on the retail price and it appears that the designer/foundry is subsidizing the withholding tax of the font vendor.

    I'm not US resident and my country hasn't any agreement or treaty with USA to make that Taxes lower, so for each $1000 USD that my product generate in sales I will only receipt $350 USD only, and that not sound too fair to me, in fact that was the specific reason that made me stop to sharing my products with that companies.

    I really don't understand why (in the case of Monotype) I'm the only one (as designer) that I must to pay that taxes and not both of us (like Creative Market), I understad that rules has changed, because the previous stage (before 2016) on Font commerce has not related with any taxes matter.
  • The commission of the font vendor from sales is known to you when you decided to sell your fonts through them. Yes, their commission is very high but they can always justify that. Even if it is too high, why do foundries/designers kept on selling their fonts through those vendors. They probably knew something that we do not know. Unless designers/foundries will stop to sell their fonts through vendors that charges high commissions, a change in favor of the designer is very unlikely. 

    As far as taxation is concerned, that is the law and there is nothing you can do about it other than follow it. Here's a summary of which countries get a lower withholding tax rate http://taxsummaries.pwc.com/ID/United-States-Corporate-Withholding-taxes Font sales fall under royalties.

    I think you are mistaken on withholding tax. At Monotype, your 30% withholding tax is only applied to your 50% share of font sales. So if your font sales is $1,000, your withholding tax is applied to your $500 so that leaves you with a profit after tax of $350. This means that your withholding tax is actually only 15% since Monotype will pay the tax for its commission. In the case of Creative Market, you are paying the whole 30% since the tax is applied to the whole $1,000 instead of just your $700 share on sales. You are getting more from Creative Market because of its lower commission and not because it is sharing the burden of paying withholding taxes on your font sales. You are actually paying the taxes that Creative Market should be paying. This is all based on the data on your first message.
  • edited May 5
    The commission of the font vendor from sales is known to you when you decided to sell your fonts through them. Yes, their commission is very high but they can always justify that. Even if it is too high, why do foundries/designers kept on selling their fonts through those vendors. They probably knew something that we do not know. Unless designers/foundries will stop to sell their fonts through vendors that charges high commissions, a change in favor of the designer is very unlikely. 

    As far as taxation is concerned, that is the law and there is nothing you can do about it other than follow it. Here's a summary of which countries get a lower withholding tax rate http://taxsummaries.pwc.com/ID/United-States-Corporate-Withholding-taxes Font sales fall under royalties.

    I think you are mistaken on withholding tax. At Monotype, your 30% withholding tax is only applied to your 50% share of font sales. So if your font sales is $1,000, your withholding tax is applied to your $500 so that leaves you with a profit after tax of $350. This means that your withholding tax is actually only 15% since Monotype will pay the tax for its commission. In the case of Creative Market, you are paying the whole 30% since the tax is applied to the whole $1,000 instead of just your $700 share on sales. You are getting more from Creative Market because of its lower commission and not because it is sharing the burden of paying withholding taxes on your font sales. You are actually paying the taxes that Creative Market should be paying. This is all based on the data on your first message.
    I decided to sell fonts with them, because the starting conditions was to be more favorable until that "taxes law" appear on 2016.

    I really feel that the amount that designers must to share to sell their fonts through that companies is too high, no matter what they know, no matter justifications, and no matter anything that I can reasonable understand, at the end, the example of each $1000 in sells and obtain only $350 from that starting $1000 is not look too fair to me.

    I understand the way how percentages are calculated on each case, my question here is not the formula applied on every calculation, but how much percentage from earnings is fair to share with each part? in the hypothetical scenario if we could choice to deal that amounts, how much do you feel fair? and have a better parameter to choose which company is better to work with and which not.
  • <rant>
    Please, don't use the word "commission". Font distributors don't take commissions, they pay royalties on sales of licenses. Sales people working for font distributors might get a commission (meaning: a percent of the distributor's share of the sale price as an incentive to sell more licenses), but the distributor's net income after paying royalties is not a commission. It's just their net income. Calling it a commission is incorrect and confusing. 
    </rant>

    Sorry for going off-topic. This just really bugs me.

    My apologies for the wrong choice of words.
  • The question is what is the reseller doing for your sales that you wouldn't be able to do yourself. To paraphrase an adage from the book publishing world - making fonts is easy, selling fonts is hard. A 50/50 split is fair if the retailer is providing you a platform for higher sales. Not that I wouldn't want to be getting more :)
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