April 7, 2010

Five out of six publishers agree: Uh-oh

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Enough with the Apple iPad stories, you say? Well, how about a related story that’s shocking in a paint drying kind of way — say, if the paint dried into completely the wrong color, like, say, plaid?

The story comes from Michael Cader at Publishers Marketplace, who says “Steel yourself for what may be one of the most tedious yet important stories we have filed yet on the agency model. The scintillating subject matter: sales taxes.”

It seems publishers switching to the agency model may have overlooked one thing — they may have unwittingly obligated themselves to having to collect and pay all relevant sales taxes on all books sold under the model, although the key word here is may:

Simply put, when a retailer becomes your commissioned “agent,” the obligations for collecting, reporting and remitting sales tax may change. And there appears to be no single, simple interpretation of the new rules from among those publishers who have made the switch so far. … We have received only one clear and consistent line of advice: Any publisher contemplating selling on an agency basis is well-advised to seek counsel on the attendant sales tax implications. Also note that, if you’re doing business with Apple, under their stated terms they are your agent (“Apple is acting as agent for the Provider in providing each such Product to you”).

As Cader continues, there are “lots of companies that may not have addressed it yet,” and many of those that have don’t agree on what the relevant laws mean. For example, “LibreDigital says on their website in a FAQ answering, Will I have to pay sales tax?: ‘No. Apple will charge the end customer sales tax on purchases made through iBookstore and remit to the appropriate sales tax collection authorities.’ But spokesperson Heidi Johnson told us that technically the contract does say the publisher is ‘responsible’ for the collection and remittance of the tax.”

And that’s just the situation with Apple.

It is potentially a nightmare beyond imagining for publishers — except for one of them, that is. Random House, which has been subject of some ridicule the last few days for being the only one of the Big Six publishers who didn’t jump to the agency model, is suddenly looking like a bunch of geniuses to some stressing competitors.

Dennis Johnson is the founder of MobyLives, and the co-founder and co-publisher of Melville House. Follow him on Twitter at @mobylives

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