Are the Apple ebook settlement credits taxable?

account-1048671_640There is an interesting discussion in progress on the Amazon customer forums. One of the post asked the interesting question “Given how much money that some people got – are ‘we’ (global we) going to have to report this money on our taxes? Since its a settlement and not a refund?”

While I only received a modest refund of $24 (I started boycotting books over $9.99 when agency pricing went into effect), many customers have reported receiving refunds in the hundreds of dollars. The biggest amount I saw posted on the forums claimed a $1888.73 refund.

The discussion references IRS Publication 525 (which seems to be about employee and business issues). The document does suggest that punitive damages may indeed be taxable.

One comment says:

This was only a quick search, but most of the links that came up under “Are settlements taxable” seem to think so. Also, https://www.irs.gov/businesses/small-businesses-self-employed/lawsuits-awards-and-settlements-audit-techniques-guide#_Toc305586651

“Punitive Damages

Punitive damages are not excludable from gross income under IRC § 104(a)(2).

With the enactment of SBJPA, Public Law 104 -188, Section 1605(a) in 1996, Congress made it clear in IRC § 104(a)(2) that punitive damages are taxable, regardless of the nature of the underlying claim.

IRC § 104(a)(2) states gross income does not include —

“the amount of any damages (other than punitive) received (whether by suit or agreement and whether as lump sums or as periodic payments) on account of personal physical injuries or physical sickness.”

In the Ebook Settlement FAQ, Amazon notes that it did not disclose any personal customer information regarding this settlement. The discussion also notes that “Other Income” generally requires the issuance of a IRS Form 1099, which no one seems to have received.

The discussion seems pretty split with some saying it would be taxable and others saying not. So far, no attorneys or CPAs have stepped up to weigh in on the topic. I didn’t hear anything about any tax liabilities on the previous publisher portion of the settlement – of course, mine was only $2, so it was a non-issue, at least for me.

While it is a fascinating discussion, since I am neither a lawyer or a tax consultant, I have no idea where this ebook settlement actually falls in terms of tax liabilities. Any thoughts?

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Apple appeal rejected by Supreme Court (Round up)

supreme-court-546279_1280Here is a round up of some of the coverage from today on the Supreme Court’s rejection of the Apple books appeal:

Supreme Court summary decision (PDF)

Supreme Court rejects Apple’s appeal (Publishers Weekly)

Apple rejected by US High Court in $450 million e-book case (Bloomberg)

Supreme Court will not hear Apple antitrust appeal – lower court decision stands (Teleread)

Apple is On the Hook for the $450m Settlement after Supreme Court Rejects Apple’s eBook Conspiracy Appeal (The Digital Reader)

Apple loses e-books price-fixing appeal in U.S. Supreme Court (Techcrunch)

Over the next few days, there will be a lot of discussion about lessons learned, what happens from here and when consumers will see credits from their ebook retailers. Apple’s damages are over double the damages paid by the Big 5 publishers and released back in 2014, so it should be interesting.

I, for one, am glad that it’s over. How about you?

Daily Links: Grooveshark Guilty of Mass Copyright Infringement

From Digital Music News, Grooveshark has been found guilty of massive copyright infringement. The details of what the company did are pretty shocking. I am the wife of a talented musician whose music was illegally used by Grooveshark, We not only lost music sales income, but had to go as far as to hire an attorney to deal with the company’s infringement. Here’s a link to his wonderful holiday jazz album.  🙂

The FCC is considering rules that will change Television, from Mashable. This has the abiltiy to breathe new life into a company like Aereo. I don’t know about you, but I haven’t been able to get certain channels since they made the change to digital broadcast!

From Teleread, R.I.P. Eugie Foster. The Nebula award winning writer and editor died on September 27, 2014. Here is a link to her books. 

The Kindle app for IOS has been updated for the iPhone 6, from The Digital Reader. http://the-digital-reader.com/2014/09/29/kindle-ios-updated-iphone-6/

Daily Links are interesting links I discover as I go about my online day. The frequency and number of links posted depend upon the daily news.

Judge approves price fixing settlement

I almost missed this one in my effort to follow all the new e-reader news today: Judge Cote approved the DOJ settlement with three of the so-called “big six” publishers.  Under the terms of the settlement, HarperCollins, Simon & Schuster and Hachette will no longer be using agency pricing.

You have to admire a judge who quotee Emily Dickenson in her ruling and reflects a certain amount of cynicism as well:

In another section of the decision, Judge Cote acknowledges that the vast majority of public comments in response to the settlement were negative. She adds, however, that some comments were “extreme” and sought to blame “every evil to befall publishing on Amazon’s $9.99 price for newly released and bestselling e-books, and crediting every positive event — including entry of new competitors in the market for e-readers — on the advent of agency pricing.”

Consumers who don’t like agency pricing (like myself) will see this as a decided victory. The  lawsuit against Apple and two other publishers, however,  has yet to go to trial.

Now, let’s see it the price comes down on Stephen King’s On Writing. Then, if only we can get them the government to work on the library lending issue, I’ll be a happy camper….

DOJ files suit against Apple, Big Five

As has been hinted at for weeks, the Department of Justice has filed a civil suit against Apple and the so-called “Big Five” publishers: Hachette SA, HarperCollins, Macmillan, Penguin and Simon & Schuster.  Random House did not initially sign on to the ageny model, so it is not a part of the U.S. lawsuit. The DOJ has alleged collusion and price-fixing over the agency pricing model. Here’s a link to the DOJ filing. The level of detail in the filing is amazing and very muh at odds with rumors that the DOJ “had no evidence of any wrongdoing.”

According to this article from Bloomberg, Hachette, Simon & Shuster, and Harper Collins are rumored to have settled with the DOJ. The article further states that Penguin intends to fight.

In Macmillan’s response, CEO John Sargent says that they will fight the suit.

Penguin says users can’t sue

Paid Content is announcing that Kindle and NOOK users must accept arbitration instead of suing them in the pending class action lawsuits over ebook pricing. Penguin is using the rationale that users agreed to this in Amazon and Barnes and Noble’s terms of service for the ereader devices.
 
I am not a lawyer, but I don’t think the argument holds water. When the publishers put the agency model into effect, Amazon became their agent, not the other way around. Amazon even collected sales tax based on the publisher. It doesn’t make sense that the publisher can’t turn around and hide behind Amazon on this one.