WHY DOESN’T SUBSTACK WARN WRITERS ABOUT THE INTERNATIONAL TAX TRAP IT BUILT INTO THE PLATFORM
by Mark A. Shryock
I just found out I owe thousands of dollars in taxes I never knew I was accumulating, because Substack never warned me this could happen. The debt built up quietly, most times from a single one time donation, from well meaning and truly kind people trying to support my work. They did nothing wrong. Substack is the one that set the trap and said nothing about it. I have spent all day today dealing with it.
Substack could issue a warning to its writers about the consequences of writing to an international platform. It does not. Substack deliberately blocks your option to simply turn off paid subscriptions from international readers. There is no setting for it. I have had to block all international countries from being able to support me through paid subscriptions at all, just to stop the bleeding.
My international readers, whom I love dearly and who give me a great deal of emotional support and wisdom, will always be able to read my writing without a subscription. That offer is open to everyone, from any country. United States readers keep the option to support my work financially if they choose to.
If you are a writer on Substack, please read this, and please share something similar on your own Substack so we can warn each other. Some days it feels like the graft never ends no matter what you try to do.
Here is what is actually happening, as best I can lay it out after going through it myself today.
Substack avoids taking responsibility for international tax issues because it operates as a payment processor gateway, not as a Merchant of Record. When a reader from another country buys a subscription from you, you legally become a cross border business selling digital services into that country. In places like the European Union or the United Kingdom, you can owe Value Added Tax, VAT, starting from your very first sale.
Substack shifts one hundred percent of that tax liability onto the writer, and it does this through its own corporate structure and the limitations it builds into the platform. Unlike Patreon, Gumroad, or Lemon Squeezy, Substack does not act as the legal seller of what you are selling. Platforms that act as a Merchant of Record calculate, collect, and remit international taxes for you automatically. Substack does not do this.
Instead, Substack passes the responsibility to Stripe, the company that processes its payments. Stripe Tax can be configured to calculate and collect VAT or sales tax at checkout, but Stripe does not remit that money to foreign governments on your behalf. And that Stripe Tax service is not free. Depending on what countries and how many, it can run anywhere from ninety dollars to a few thousand dollars a month, plus registration fees of fifty five to one hundred dollars per country, often due every couple of months. Filing those tax returns, in whatever country the sale came from, is still on you.
Over half of my audience is international. Many of them have supported me financially at one time or another. I only have one hundred and eight paid subscribers out of the ten thousand who follow my work, but a single one time donation by subscription can create hundreds of dollars in filing and registration fees, and a quagmire my own CPA told me she would not touch.
Substack also does not give writers a native way to block subscriptions from specific countries. That leaves you exposed to sudden tax compliance obligations in more than fifty countries with no way to filter them out from inside the platform itself.
The financial burden of trying to stay compliant across all of that can wipe out an independent writer’s income entirely. In the UK and the EU, foreign digital creators face a zero dollar registration threshold. You technically owe VAT the moment a reader in Germany, where VAT is nineteen percent, or a reader in London, where VAT is twenty percent, buys a subscription from you. Registering for the right tax brackets, filing quarterly international returns, and hiring accounting help to navigate foreign tax bureaucracies can cost thousands of dollars a year, on top of whatever you actually owe.
If you have international paid subscribers right now, here is what you can do. You can activate Stripe Tax by following Substack’s own Stripe Tax integration guide and asking Substack support to turn on tax collection for your publication. You can monitor your thresholds through your Stripe Tax dashboard to see exactly which countries your income is coming from and where you have crossed a legal threshold. And if you decide you do not want to deal with any of this, you can use Stripe Radar inside your connected Stripe dashboard to block transactions originating from outside your home country.
I chose that last option. It is not what I wanted to do.
Copyright © Mark A. Shryock. May be shared with attribution.
Source: https://stories.byburk.net/substack-has-a-vat-problem-5c00e1f746f6
Source: https://www.justanswer.com/tax/reyrc-substack-paid-subscription-service.html
Source: https://www.reddit.com/r/Substack/comments/1ij3hwr/substacks_big_secret_state_taxes_vat/
Source: https://pubstacksuccess.substack.com/p/substack-payments-everything-you
Source: https://www.reddit.com/r/Substack/comments/1af9j0g/tax_questions/
Source: https://www.reddit.com/r/Substack/comments/1o6oup2/a_critical_warning_to_all_usbased_creators_on/
Source: https://stripe.com/resources/more/cross-border-tax-compliance
Source: https://support.substack.com/hc/en-us/articles/12282257442580-Does-Substack-integrate-with-Stripe-Tax
Source: https://docs.stripe.com/payments/managed-payments/tax-compliance
Source: https://support.stripe.com/questions/block-payments-from-tax-unsupported-countries-using-radar
Subscribing is completely free. International subscribers are blocked from supporting me due to the way Susbstack makes the writer carry all of the tax burden which can be hundreds of dollars in filing and registration fees for a simple 8 dollar donation. Please subscribe though. It means a great deal to me that you are here and I gain in wisdom and emotional support so much from you as I do all my readers. I have disabled automatic email updates so my posts won’t clutter your inbox. If you choose to donate on Substack, please note it is a recurring commitment (though you can unsubscribe at any time).
For those who prefer a one-time support option, please copy and paste my Ko-fi link into your browser:
What? That's ridiculous. It's scandalous that these corporations slough all financial responsibility off themselves... so what else is new? I will say though, I really don't understand this business model to begin with. I visited Substack's website and their entire schtick seems to be you can run your own business, recruit your own readers, yada yada yada. How does that work, unless you're a household name, know how to work the system, or are extremely lucky? It seems a scheme like YouTube's would be better, where the content creators are paid by the platform and at least there's a (very weak, I know) attempt made to feature new contributors.
Mark, that's terrible - and shame on Substack for not being open about it. This must be frustrating and infuriating. I am sending you a hug🌸