This article will help self-published authors understand the structure of the royalty payments received from selling your eBooks through Amazon KDP. Before we get too technical let's take some time to cover the basics.
Amazon’s own special eBook format.
Amazon will only allow you to sell your eBook in a MOBI eBook format. (Short for Mobipocket)
Not sure how to get your MS Word manuscript into the MOBI format? No problem. The Amazon KDP platform for self-published authors will allow you to load your manuscript in common DOC/ DOCX/ PDF formats and will then attempt to automatically convert these files into a MOBI format.
More often than not these automated conversions are riddled with mistakes and I would recommend having your eBook professionally converted rather than risk a poor conversion should your manuscript be more than just plain text.
Amazon’s royalty options - 35/ 70
When selling your eBook on Amazon you are able to select one of two royalty options, either 35% or 70% of the list price. That's right, you decide if you would like 35% or 70%. Here is the catch.
Selecting the 70% option will only be an option if your eBook is priced between $2.99 and $9.99
That's right, any price outside of boundaries will automatically set your royalties to the 35%. So think very carefully when pricing your eBook at $15 for example - You will be earning less than if you rather opted for 70% of $9.99
Amazon’s Delivery Charge
By selecting the 70% option Amazon will now also deduct a Delivery Charge from your royalties. Amazon’s Delivery Charge is equal to $0.15 per MB of eBook.
The delivery charge is not levied if you select the 35% royalty payment.
So if your eBook file size (after loading the file into the KDP platform not before) is 2MB, you will have $0.30 deducted from your final royalty payment for that sale.
Tax withheld on sales of your eBooks
As an author outside the first-world, assuming you have not yet applied for an international tax identification number (ITIN) Amazon will withhold the default of 30% (SA authors) of your royalty payment. For authors outside the mainstream countries of the US, UK and Europe it is possible to reduce the amount of taxes that might be withheld from your payments.
Read my post here on reducing the taxes withheld by Amazon for self-publishing authors.
I have spoken at length on this $2 surcharge here
I see this surcharge after pricing an eBook on Amazon at $6.99 for example yet the price that our readers from South Africa see for the same title is considerably higher. This is due to Amazon adding the Whispernet surcharge. Essentially Amazon charges our readers an extra fee, that in no way then benefits you as the author.
Important to note, readers purchasing your title from the first world countries will not see the surcharge and will see the intended $6.99
Dont forget sales tax
Every territory will have their own sales tax on the sales of (e)Books.
South Africa for example still charges 14% on top of your listed price as Value Added Tax.
Amazon KDP Royalty Calculation
So here it is, the calculation of Amazon’s royalty payments is as follows;
Royalty Rate x (Amazon list price - Sales Taxes - Delivery Costs) = Royalty (in $)
List Price: This is the price (in $) you selected when setting up the title in the KDP backend.
Royalty Rate : 35/ 70% of list price. Once again this depends on the price you decided to sell at.
Delivery costs are levied at $0.15 per MB file size.
Royalty Calculation Example:
70% Royalty Option.
- UK Pounds VAT Inclusive List Price = £1.99.
- UK Delivery Costs = £0.10/MB
- Book's file size is 1 MB
- Applicable VAT in UK is 20%
- We don't price-match your book.
Your Royalty per sale to a UK customer from Amazon.co.uk is:
0.70 x (£1.99 - £0.33 - £0.10) = £1.09
Royalty Rate x (List Price – applicable VAT - Delivery Costs) = Royalty
Applicable VAT calculation: 20% x £1.66 = £0.33. £1.66 + £0.33 = £1.99
For those authors designing image-heavy books, seriously consider reducing the size of the images used to reduce the delivery charge from Amazon.
To stay up to date on this royalty calculation, visit Amazon's pricing page.
I would love to hear if this helped you. Your questions and comments are always appreciated!