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Have you heard about the new CA law, AB5? Designed to turn gig economy workers into employees, this law wraps up almost all freelancers into its net. Here's a quick explanation of AB5:

https://www.dlawgroup.com/what-is-california-ab5-law/

Here's one attorney saying that book writers who live in California are pretty much screwed:

http://www.ivanhoffman.com/AB5Revising.html

I think someone could make an argument that KDP is the employer (especially if you are exclusive) and therefore people publishing with them should have their employment status changed.

Of course, being a W2 employee means you don't own your IP, your employer does.

If you are a writer based in California, OR if you hire freelancers based in CA for editing, cover design, etc. you need to be aware of this law and its ramifications.

Fun times.
 

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But authors aren't freelancers, they're sole proprietors of their own business. Amazon isn't hiring authors, they're allowing authors to sell on their sales platform.
 

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This is typical California overreach and will no doubt be tamed down to something more reasonable.

But to address the OP:

1. Amazon is a distributor. They are, in fact, providing a service to us - they are hosting our books, printing our books if we use their paperback service, taking money (deducting a commission), collecting sales tax and VAT. It's more accurate to say that Amazon works for us than the other way round. Saying we work for them is like saying Perdue works for Giant.
2. If you are a W2 employee your IP only belongs to your boss if your contract says so, it's not actually automatic.

As for hiring freelancers based in CA, it sounds bad. I mean, producing books is the ordinary and necessary part of our business, so arguably our editors should be employees, which would be ridiculous.

HOWEVER, the law also includes a paragraph that basically says "If you are a business and you are contracting to provide services to another business" you're fine. It does mean you MUST get a written contract if you or your editor are in CA, but you probably should anyway (I'm real lazy about this because I trust my editor and cover artist, but it wouldn't be onerous). Basically, our relationship with our editors and cover artists is considered a "bona fide business-to-business contracting relationship" that isn't covered by the law because B2B is different from B2C.

I do worry it might have an impact on the RPG industry, but for us self publishers it's not a problem at all.

Relax. (I don't LIKE this law but I read it all the way through when the first panic about it erupted).
 

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ShayneRutherford said:
But authors aren't freelancers, they're sole proprietors of their own business. Amazon isn't hiring authors, they're allowing authors to sell on their sales platform.
I agree with Shayne ... Indie writers are self-employed entrepreneurs, as is anyone who is sole-proprietor -- ask the IRS when we pay double dip on SS and Medicare as employers. We (Indies) are Amazon Vendors. Amazon only provides the platform, and has no say in our work hours or quality or quantity of our products.

I once lived in California (25 plus years ago), ran a building business - and hired many subcontractors. California has always attempted to increase its tax bite thru interpretation of labor laws (among other attempts). I believe even now, it looks to grab a bigger piece of every pie because it cannot seem to fund its own house. Lately, if California can't find a law to fit, it just creates one.

I think a lot of this employer/employee debate comes thru Uber and Lift type companies who actually control the drivers much more so than other types of subcontractors.

ON EDIT - new post above: Jennifer is pretty right as well. It's complex, but only if you allow yourself to fall into the semantics trap that California sets here. Protect yourself, even with an open-end contract and annual 1099's - that should do it. Indies should do that anyway.
 

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boxer44 said:
Protect yourself, even with an open-end contract and annual 1099's - that should do it. Indies should do that anyway.
I am not a lawyer, so the below is not legal advice.

***

As I understand the law, if it's genuinely business-to-business, no 1099 is needed.

Example 1: I pay an editor $1000 (above the $600 IRS Form 1099 threshold) by check in their name, or via PayPal to their individual (not business) PayPal account, or to their personal checking account. I must file a 1099.

Example 2: I pay Totally Superiorest Editing LLC Inc. $1000 for editing, by check written from my business checking to that business name, or from my business PayPal to their business PayPal, or wire transfer from my business account to theirs. I don't need to file a 1099, even if I am the sole proprietor of my business and Totally Superiorest Editing LLC Inc., is also a sole proprietorship. That's a bona fide business to business transaction--just like your business purchasing any other service or goods, such as renting a car for travel, office supplies, a new computer, whatever. You don't need to 1099 a car rental company, even if that company is one guy with 1 car to rent--as long as it's business-to-business, not personally contracting.
 

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Yes, I believe 1099 only applies to contract labor ... not material suppliers.  As such, editors - artists would require 1099.

California, and other states, were/are after contractors of all kinds that have no license (trade or business) and were book-legging work ... sometimes 'on the side' and not paying license fees, W/C insurance or taxes.  And, under-reporting or not reporting income.
 

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Coming from a public accountant, a good rule of thumb to follow is thus:

1. If you pay an INDIVIDUAL (as in you made a check payable to John Thomas) more than $600, you issue a 1099 (caveat, this is for US Federal purposes. Check with your state to determine if it complies with Fed filing requirements) if they are independent contractors or W2's if they are employees. There is a vast difference between tax treatments of the two and business people have been taking advantage of this for decades. This is also were CA and other States are most concerned. By paying an individual as an independent contractor, you're not withholding and remitting taxes - money needed by the state/city to pay for things like firefighters, police, librarians or any other public works bill. You're also not paying worker's comp insurance, Family leave, etc, etc. It cuts the state out of what it sees as its fair share of tax revenue, especially when the individual receiving the 1099 may not even file their taxes, or if they do, take improper treatment of deductions to lower their tax liability. Remember, it's the taxpayer's responsibility in this country to prove how much of a return they are entitled to, NOT the government's to prove how much they owe. Sucks, but it's the truth. The alternative is to have a government auditor come into our homes every years, give them access to our bank and financial information, and let them decide how much of our money we should keep. To help combat this, the IRS set standards (not rules) on who is considered to be an independent contractor, standards like controlling when they work, how they work, where they work, conditions for work. Most states follow these standards, though some don't. Because these standards (not rules) are meant to be guidelines, they are left open to interpretation, and employers have interpreted them in so many ways that court cases more than a decade old are still pending. CA's AB5 sought to clarify this. This will mean the death of some "gig" economies in the state, just as when the IRS created their guidelines in the first place, but will also mean that companies like Lyft and Uber are correctly classifying employees as well.

2. If you pay a BUSINESS (as in you made a check payable to John Thomas Design LLC), you generally don't have to worry about issuing 1099's. There are exceptions to this rule, but a competent accountant will know what they are. The point is when we hire someone to edit, do cover design, format or any other number of tasks, we are hiring them to do one off work. We are not giving them a job even if we hire them multiple times. We do not control when they work, how they work, or where they work. As such, none of the AB5 laws apply to the vast majority of us. If you want to make sure you're covered in case of an audit, keep good notes and records, save receipts, and generally don't be piggish about pulling the wool over the government's eyes. We get you don't like paying taxes, but like an old friend of mine says, "Fines are what you are forced to pay for doing something poorly, taxes are what you're forced to pay for doing something well."
 

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caleemlee said:
Have you heard about the new CA law, AB5? Designed to turn gig economy workers into employees, this law wraps up almost all freelancers into its net. Here's a quick explanation of AB5:

https://www.dlawgroup.com/what-is-california-ab5-law/

Here's one attorney saying that book writers who live in California are pretty much screwed:

http://www.ivanhoffman.com/AB5Revising.html

I think someone could make an argument that KDP is the employer (especially if you are exclusive) and therefore people publishing with them should have their employment status changed.

Of course, being a W2 employee means you don't own your IP, your employer does.

If you are a writer based in California, OR if you hire freelancers based in CA for editing, cover design, etc. you need to be aware of this law and its ramifications.

Fun times.
Jennifer R P said:
This is typical California overreach and will no doubt be tamed down to something more reasonable.

But to address the OP:

1. Amazon is a distributor. They are, in fact, providing a service to us - they are hosting our books, printing our books if we use their paperback service, taking money (deducting a commission), collecting sales tax and VAT. It's more accurate to say that Amazon works for us than the other way round. Saying we work for them is like saying Perdue works for Giant.
2. If you are a W2 employee your IP only belongs to your boss if your contract says so, it's not actually automatic.

As for hiring freelancers based in CA, it sounds bad. I mean, producing books is the ordinary and necessary part of our business, so arguably our editors should be employees, which would be ridiculous.

HOWEVER, the law also includes a paragraph that basically says "If you are a business and you are contracting to provide services to another business" you're fine. It does mean you MUST get a written contract if you or your editor are in CA, but you probably should anyway (I'm real lazy about this because I trust my editor and cover artist, but it wouldn't be onerous). Basically, our relationship with our editors and cover artists is considered a "bona fide business-to-business contracting relationship" that isn't covered by the law because B2B is different from B2C.

I do worry it might have an impact on the RPG industry, but for us self publishers it's not a problem at all.

Relax. (I don't LIKE this law but I read it all the way through when the first panic about it erupted).
boxer44 said:
I agree with Shayne ... Indie writers are self-employed entrepreneurs, as is anyone who is sole-proprietor -- ask the IRS when we pay double dip on SS and Medicare as employers. We (Indies) are Amazon Vendors. Amazon only provides the platform, and has no say in our work hours or quality or quantity of our products.

I once lived in California (25 plus years ago), ran a building business - and hired many subcontractors. California has always attempted to increase its tax bite thru interpretation of labor laws (among other attempts). I believe even now, it looks to grab a bigger piece of every pie because it cannot seem to fund its own house. Lately, if California can't find a law to fit, it just creates one.

I think a lot of this employer/employee debate comes thru Uber and Lift type companies who actually control the drivers much more so than other types of subcontractors.

ON EDIT - new post above: Jennifer is pretty right as well. It's complex, but only if you allow yourself to fall into the semantics trap that California sets here. Protect yourself, even with an open-end contract and annual 1099's - that should do it. Indies should do that anyway.
David VanDyke said:
I am not a lawyer, so the below is not legal advice.

***

As I understand the law, if it's genuinely business-to-business, no 1099 is needed.

Example 1: I pay an editor $1000 (above the $600 IRS Form 1099 threshold) by check in their name, or via PayPal to their individual (not business) PayPal account, or to their personal checking account. I must file a 1099.

Example 2: I pay Totally Superiorest Editing LLC Inc. $1000 for editing, by check written from my business checking to that business name, or from my business PayPal to their business PayPal, or wire transfer from my business account to theirs. I don't need to file a 1099, even if I am the sole proprietor of my business and Totally Superiorest Editing LLC Inc., is also a sole proprietorship. That's a bona fide business to business transaction--just like your business purchasing any other service or goods, such as renting a car for travel, office supplies, a new computer, whatever. You don't need to 1099 a car rental company, even if that company is one guy with 1 car to rent--as long as it's business-to-business, not personally contracting.
Jennifer R P said:
I actually believe that a 1099 still needs to be filed UNLESS you use Paypal, Amazon payments to receive payments from somebody who isn't Amazon, Square, Stripe, etc...in which case the payment processor is responsible.

But it's still business to business and thus not what this law is supposed to address.
boxer44 said:
Yes, I believe 1099 only applies to contract labor ... not material suppliers. As such, editors - artists would require 1099.

California, and other states, were/are after contractors of all kinds that have no license (trade or business) and were book-legging work ... sometimes 'on the side' and not paying license fees, W/C insurance or taxes. And, under-reporting or not reporting income.
Rob Martin said:
Coming from a public accountant, a good rule of thumb to follow is thus:

1. If you pay an INDIVIDUAL (as in you made a check payable to John Thomas) more than $600, you issue a 1099 (caveat, this is for US Federal purposes. Check with your state to determine if it complies with Fed filing requirements) if they are independent contractors or W2's if they are employees. There is a vast difference between tax treatments of the two and business people have been taking advantage of this for decades. This is also were CA and other States are most concerned. By paying an individual as an independent contractor, you're not withholding and remitting taxes - money needed by the state/city to pay for things like firefighters, police, librarians or any other public works bill. You're also not paying worker's comp insurance, Family leave, etc, etc. It cuts the state out of what it sees as its fair share of tax revenue, especially when the individual receiving the 1099 may not even file their taxes, or if they do, take improper treatment of deductions to lower their tax liability. Remember, it's the taxpayer's responsibility in this country to prove how much of a return they are entitled to, NOT the government's to prove how much they owe. Sucks, but it's the truth. The alternative is to have a government auditor come into our homes every years, give them access to our bank and financial information, and let them decide how much of our money we should keep. To help combat this, the IRS set standards (not rules) on who is considered to be an independent contractor, standards like controlling when they work, how they work, where they work, conditions for work. Most states follow these standards, though some don't. Because these standards (not rules) are meant to be guidelines, they are left open to interpretation, and employers have interpreted them in so many ways that court cases more than a decade old are still pending. CA's AB5 sought to clarify this. This will mean the death of some "gig" economies in the state, just as when the IRS created their guidelines in the first place, but will also mean that companies like Lyft and Uber are correctly classifying employees as well.

2. If you pay a BUSINESS (as in you made a check payable to John Thomas Design LLC), you generally don't have to worry about issuing 1099's. There are exceptions to this rule, but a competent accountant will know what they are. The point is when we hire someone to edit, do cover design, format or any other number of tasks, we are hiring them to do one off work. We are not giving them a job even if we hire them multiple times. We do not control when they work, how they work, or where they work. As such, none of the AB5 laws apply to the vast majority of us. If you want to make sure you're covered in case of an audit, keep good notes and records, save receipts, and generally don't be piggish about pulling the wool over the government's eyes. We get you don't like paying taxes, but like an old friend of mine says, "Fines are what you are forced to pay for doing something poorly, taxes are what you're forced to pay for doing something well."
Nice to know.
 

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Rob Martin said:
Coming from a public accountant, a good rule of thumb to follow is thus:

1. If you pay an INDIVIDUAL (as in you made a check payable to John Thomas) more than $600, you issue a 1099 (caveat, this is for US Federal purposes. ...

2. If you pay a BUSINESS (as in you made a check payable to John Thomas Design LLC), you generally don't have to worry about issuing 1099's.
Bingo.
 

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This is great news for freelance agencies that specialize in non-California writers

These agencies are making quite a bit of an impact in the Kindle publishing world because they crank out COMPLETE BOOKS for as little as $99.

Crazy
 

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This is a great new policy in California to help address the exploitation of so-called gig workers.

This has ZERO effect on us writers.

Carry on.
 
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