Sorry, for some reason I’m still having a hard time understanding. If a developer with less than $1 million in revenue sells an app on Amazon’s app store for $100 Amazon would get $30 and the developer would get $70 from each sale but now Amazon will get $20 and the developer will get $80 plus $10 in AWS credit from each sale. Am I understanding that correctly?
The first paragraph of the article is much clearer, and seems to agree with your interpretation:
“The Amazon Appstore has announced that it will be reducing its cut of developer revenue from 30% to 20% for developers that earn less than $1 million in revenue per year. The new terms, which Amazon is calling the Amazon Appstore Small Business Accelerator Program, will also provide developers with AWS promotional credit in an amount equivalent to 10 percent of the developer’s revenue if they earn less than $1 million in revenue per year. If a developer chooses to use those AWS credits, that brings their total Amazon Appstore revenue share up from 70% to an equivalent of 90%.”
You sell for $100. Amazon was taking $30. Now Amazon takes $20 and gives you a "promotional credit" of 10% of the $80, or $8.
So if you use all of the "promotional credit" then you make $88 which is not quite the equivalent of 90% but pretty close.
Assuming "promotional credit" means just regular credit you can use for anything on AWS, I wonder how much of this credit either gets left on the table (don't need AWS, credit expires) or stimulates further spending for Amazon (let's use AWS, it's "free").
It might be interesting to have that extra 8% not booked as revenue, but IANAn Accountant.
Sounds like at least Amazon doesn't view this as taxable income.
> 3. You may not sell, license, rent, or otherwise transfer Promotional Credit. Promotional Credit may be applied only to your own AWS account. Promotional Credit has no intrinsic value, is not redeemable for cash, has no cash value, is nonrefundable, and serves merely as a means to provide an incentive to use our Services. Promotional Credit may not be purchased for cash, and we and our affiliates do not sell Promotional Credit.
I don't think it matters either way... If it was cash spent on AWS, it would be a business expense and the total amount given to the taxman would be the same by all parties right?
Misreporting income is not a great idea even if it doesn’t change your tax liability. That said, I think of the “credit” as an elaborate discount or coupon system. Any CPA worth their salt could find a justification for why it’s not income.
I think a tax lawyer would have to answer this, and that it probably depends on the country.
In my country, I (even if "I" means a company) can receive a business gift with a maximum value of 42eur, twice per tax year from one company - everything above that is taxed.
Let's say i did some work for a local store and charged them 2000eur for my work. To do my work, I had 1000eur of expenses. I pay tax on 1000eur difference. With eg. 20% income tax, I'd have 800eur of profit. (yes, a bit simplified, I know)
Then they decide to give me a 200eur coupon for their store and give it to me (to my company), and this is counted towards my income (2200eur now). If i actually need stuff from their store, I use it, so now I earned 2200eur gross, spent a 200eur coupon in their store and 800eur anywhere, I have 1200eur of profits, and even after tax I earn more than I did before - with 20% income tax, I'd have 960eur of profit in cash form.
On the other hand, if I don't need their services, and can't sell the coupon to someone else, the situation is different. I still got 2200eur of income (2k+200eur coupon), spent 1000eur in other stores, get taxed on the 1200eur, technically still have 960eur of profit, but 200 of those are in a form of a worthless coupon, and only 760 in cash - so their usless coupon is actually costing me 40eur.
AWS gives out thousands of service credits to new US-based startups for free, so I'd find it hard to believe that those companies would be getting taxed for such a thing. I don't think those credits are taxable, in the US at least, because they are non-transferable, i.e. you can't redeem them for fiat currency.
The way I’d understand it is you should claim the income but only the portion that offset your expenses thus a net zero and no tax liability.
For example, Amazon give you $100,000. When you use only $1,000 you claim $1,000 income and $1,000 of expense. The other $99,000 is like a loan balance that hasn’t transferred to you or been “realized” and is therefore not taxable and shouldn’t even be reported afaik
Yeah, but this looks like turning actual money that they have in their hands into a "credit", and it's conditional on money changing hands and some of that actual money going to both parties involved, not a promotional credit generated out of thin air and offered to anyone who signs up. This looks an awful lot like payment-in-kind.
it's not a payment. you and the other poster are confused because in both cases yes your gross profit is higher and you do indeed need to pay taxes on that.
but in no way did AWS provide you with a source of income. they mearly decreased your expenses.
I think maybe I was (am?) reading too much into it because when I initially read that paragraph it just left me more confused! I guess I don’t really understand how the accounting of it works because they called it a “revenue share” which made me think one sale would result in:
$80 in developer revenue
$20 in Amazon revenue
But it also said the AWS credits will be based off of the developer’s revenue and judging by the “equivalent of 90%” it would seem that Amazon sees the transaction as more like:
$100 in developer revenue
($20) in developer expenses to list on the app store resulting in
