Payment FAQ — Usage

U.S. tax requirements for Usage earnings

Usage withholds United States (“U.S.”) taxes on earnings generated from the percentage of viewers in the U.S for any given calendar quarter. Please submit your US tax info in the “Bank” section of your Usage account as soon as possible.

If your tax info isn’t provided, Usage may withhold payments to you until the point in time at which you submit your U.S. tax info.

Usage is required to collect tax info from is users. If any tax withholdings apply, Usage will withhold taxes on earnings generated from the percentage of viewers in the U.S. for any given calendar quarter.

Why Usage withholds U.S. taxes

Usage has a responsibility under Chapter 3 of the U.S. Internal Revenue Code to collect tax info, withhold taxes, and report to the Internal Revenue Service (the U.S. tax authority, also known as the IRS) when a user earns royalty revenue from viewers in the U.S.

Note: Usage can’t provide advice on tax issues. Consult a tax professional to better understand your tax situation.

Submitting tax info to Usage

All Usage users that generate earnings, regardless of their location in the world, are required to provide tax info. Please submit your tax info as soon as possible. If your tax info isn’t provided, Usage may withhold payments to you until the point in time at which you properly submit your U.S. tax info.

You can follow the instructions below to submit your U.S. tax info to Usage. Note that you may be asked to re-submit tax info every three years, and that only Latin characters should be used when submitting tax forms; learn more here:

Sign in to your Usage account
Click “Bank”
Click “Add a Payout Method”, and add a payment method (either bank account or PayPal)
Click “Submit a Tax Form”, follow the on screen instructions, and submit your tax form

Tip: After you submit your tax information, return to the “Bank” section of your Usage account to find the tax withholding rates that will apply to your royalty payments.

You can make edits to your tax form in case your individual or business circumstances change. If you've changed your address or permanently moved your country of residence, make sure your updated permanent address is the same in both of the following areas of the “Bank” section of your Usage account:

"Payout Methods" (click the pencil icon on the right side of the “Bank” section and update your tax profile address), and
"Complete a New Tax Form" whereby you provide your tax information again and include your updated permanent and/or mailing address

This will ensure that your year-end tax forms (e.g., 1099-MISC or 1042-S) are delivered to the correct location. Please note that we highly recommend that you select e-delivery (as opposed to mail) as your year-end tax form delivery method. You will be presented with the option for e-delivery upon submission of your tax form.

If your mailing address or address of permanent residence changes, you must resubmit your tax form with your updated legal addresses.

Where U.S. tax requirements apply

Every Usage user, regardless of their location in the world, is required to provide U.S. tax info to Usage. Under U.S. tax law, Usage is required to deduct taxes from the percentage of earnings generated from U.S. viewers in any given calendar quarter. The tax withholding requirements can differ depending on your country of residence, whether you're eligible to claim tax treaty benefits, and whether you identify as an Individual or a Business.

Users outside of the U.S: If you submit U.S. tax info, withholding rates are between 0-30% on the percentage of earnings generated from viewers in the U.S. and depend on whether your country has a tax treaty relationship with the United States.
U.S. users: Usage will not withhold taxes on earnings if you have provided valid tax info.

Important: If no U.S. tax info is provided or if you are a foreign individual or business and you complete a U.S. tax form but fail to include a Foreign Taxpayer Identification Number (FTIN) on your tax form, Usage may be required to withhold using the maximum tax rate or to withhold payment to you entirely until the point in time at which your tax information is properly provided. If no U.S. tax info is provided and we remit royalties to you, your withholding tax rate will depend on your account type and country:

Business account type: the default withholding rate will be 30% of U.S. earnings if the payee is outside of the U.S. Businesses in the U.S. will be subject to 24% withholding on total earnings worldwide.
Individual account type: backup withholding will apply and 24% of total earnings worldwide will be withheld.

These withholding rates will be adjusted in the next payment cycle once valid U.S. tax info is provided in the “Bank” section of your Usage account. You can follow these instructions to determine which account type your Usage account is:

Your account type is indicated within the “Bank” section of your Usage account under “Payout Methods” – click the pencil icon on the right side of the screen to check your account type and make sure it matches (either Business or Individual) to that which you provided on your U.S. tax form and is both true and correct.

FAQ

1. What is tax withholding?

Simply put, tax withholding is when taxes are deducted from your royalty payments so that they can be paid to a government to satisfy the payee’s U.S. tax liability.

Under U.S. tax law, Usage is a withholding agent required to comply with U.S. tax law, and where required, to withhold taxes on relevant Usage earnings.

2. How will this affect my earnings from Usage?

Only the percentage of earnings from viewers in the United States during any given calendar quarter will be subject to tax withholding and reporting, if you provide valid tax information. The exact rate of tax withholding will be determined by the tax info you provide to Usage. You can view your tax-withholding rate in the “Bank” section of your Usage account once you submit your initial tax form. Tax withholding rates and amounts are not visible in “Reports”.

Hypothetical example

Here’s a hypothetical example: an Usage user (account type, Individual) in Ukraine that earns $1,000 USD (after Usage’s share) in the last quarter. During the quarter, assume that 40% of Usage earnings were generated from U.S. viewers.

Here are some possible withholding scenarios:

User doesn’t submit tax info: the final tax deduction is $240 USD because the withholding tax rate is up to 24% of total earnings worldwide if they didn't submit tax info (30% for businesses). This means that until the user submits complete tax info, we’ll need to deduct up to 24% of their total earnings worldwide, not just their U.S. earnings. Please note that in most circumstances, for users that do not submit tax information, Usage will withhold payment to you until the point in time at which U.S. tax information is properly provided.

User submits tax info (including an FTIN) and claims a treaty benefit: the final tax deduction is $40 USD ($1,000 USD x 40% x 10%). This is because Ukraine and the U.S. have a tax treaty relationship that reduces the tax rate to 10% of earnings from viewers in the U.S.

User submits tax info, but is not eligible for a tax treaty benefit (e.g. no FTIN provided or the user permanently resides in a country that does not have a tax treaty in place with the U.S.): the final tax deduction will be $120 USD ($1,000 USD x 40% x 30%). This is because the tax rate without a tax treaty (or for a foreign user that fails to provide an FTIN on their tax form) is 30% of earnings from viewers in the U.S.

Calculate your estimated tax withholding

Estimate how your Usage income may be affected with the following example calculation:

Access “Report” section of your Usage account to view your earnings (after Usage’s share) for any given calendar quarter

Assume a U.S. viewership for the quarter of 40% (the actual percentage may vary, but tends to be approximately 40% for any given calendar quarter)

Go to your “Bank” section to find your tax-withholding rate. Your withholding rate is visible after initially submitting your U.S. tax info.

Multiply the results of steps 1, 2, and 3 above.

Note that following the above only produces an estimate of tax withholding. Once Usage withholds taxes from a payment made to you, you will be able to calculate the finalized amount withheld in the “Recent Payments” area of the “Bank” section of your Usage account.

3. What criteria are you using to determine if I am a U.S.-based or not?

Your location is determined by the country of residence you declare in your tax info when completing your tax form.

4. Does this mean I will be taxed both in my country of residence as well as in the U.S.?

Usage is only required to withhold U.S. taxes from the percentage of Usage earnings from viewers in the U.S. during any given calendar quarter. Your local income tax laws may still apply to your Usage earnings.

Many countries have tax treaties that reduce or eliminate double taxation. In addition, certain countries may allow for foreign tax credits to help reduce international tax burdens. By claiming a tax treaty while completing your U.S. tax form, you may be able to reduce your tax burden. Please consult your tax advisor.

5. What kind of tax reporting documents does Usage provide?

You will see finalized tax withholding amounts within the “Recent Payments” area of the “Bank” section of your Usage account.

All users that submit tax info and who receive eligible payments, will receive a tax form (e.g. 1042-S or 1099-MISC) on or before March 15 of each year for the previous year’s tax withholdings. Please note that we highly recommend that you select e-delivery (as opposed to mail) as your year-end tax form delivery method. You will be presented with the option for e-delivery upon submission of your tax form. If you already completed a tax form but did not select e-delivery at the time of completion, please submit a new tax form and be sure to select e-delivery prior to submission.

6. Can I get a tax refund from previous withholdings?

If you don’t provide valid tax info (including providing an FTIN on your U.S. tax form if you are a permanent resident of a country other than the U.S.) by the time we remit any particular royalty payment to you and you believe you were eligible to receive treaty benefits at the time the payment was sent, then you will have to file a request for a refund directly with the IRS. We recommend you seek professional tax advice in these circumstances.