Trying to understand what value to declare on rewards you ship comes up frequently, both in questions directly to me and also on crowdfunding forums.
It’s important to get this right, as it not only effects you and opens you up to potential legal problems, but it also effects backers who live in a different tax zone to wherever you ship from.
- The backer isn’t really buying anything, just being sent a gift in return for helping out a backer
- Some backers pay more than others, so the lowest price point is the real price, and any extra is a “gift”
You’re likely to get a lot of people asking you to declare a low value to help them avoid tax.
Here’s the advice I’ve received, and thankfully it’s very simple to remember:
Declare the amount that the backer paid!
There you go, easy huh?
The advice I’ve been given by accountants says that:
- The “reward” (as opposed to an order) terminology doesn’t matter at all. In reality the customer is ordering a product.
- The price they pay is the price they pay. Sometimes people get better offers. Lucky them. That doesn’t alter the amount that another backer paid. If you got something on offer from a standard website, and a friend missed the sale, they’d pay the tax based on the price they paid.
- Never declare something on customs/tax documentation that you know to be untrue, if you get caught you’ll get in a lot of trouble.
So what can you do to help people in different tax locations?
- Make sure it’s clear on your campaign/order page that import taxes for items shipped outside of your zone are not included, and make sure they know it’s their responsibility to find out what those rates are.
- Make it clear who you’ll be shipping with, as some companies charge more than others for processing tax on imports
- If you’re big enough to support it, consider shipping rewards from multiple zones around the world. For example one EU warehouse and one US warehouse would allow me to ship to a majority of my customers without them having to worry about taxes.
That’s it, really. Don’t be convinced by people in to promising to declare a lower price because you’re afraid to lose their custom. Explain the situation, and if they’re still OK with asking you to break the law, they aren’t a backer you want.
Note on tax/legal advice
It’s important to note that I’m not an accountant, tax specialist, or a lawyer of any kind. I’m just a guy that’s shipped thousands of Kickstarter rewards, so has had to look in to this a lot. If you’re ever considering doing anything beyond “just be honest” then you should consult a specialist.