Print on Demand is a popular business model, particularly among designers and online entrepreneurs. Products are not manufactured in advance and held in stock, but are generally produced only once an order has been placed.

Although this may sound straightforward, its tax classification can raise a number of questions. This is because not all Print on Demand models are the same.

Depending on how the business model is structured, the role of the entrepreneur may be completely different.

What does Print on Demand mean?

“Print on Demand” – or POD for short – means that products are printed or manufactured only when they are ordered.

Instead of having to manufacture and store T-shirts with a particular design in advance, for example, the product is only produced after a customer has placed an order.

This allows the entrepreneur, for example, to focus on creating designs without having to operate their own production facilities or maintain inventory.

However, it is important to note that Print on Demand initially describes only how and when a product is manufactured. It does not in itself determine who actually sells the product to the end customer.

And it is precisely this distinction that is important for tax purposes.

Not all Print on Demand models work in the same way

Different business models may operate under the term Print on Demand.

For example, an entrepreneur may operate their own online shop, sell products to customers in their own name and merely commission an external POD provider to handle production and shipping. In this case, the entrepreneur remains the seller in relation to the end customer.

With a platform-based model, however, the roles may be distributed differently. For example, the entrepreneur may provide the design while the platform manufactures and sells the physical products.

Although both models are referred to as Print on Demand, they may therefore constitute different types of economic activity.

The following questions are particularly important:

• Who sells the product to the end customer?
• Who manufactures and ships the goods?
• Who determines the prices and terms of sale?
• What service does the entrepreneur personally provide?
• What is the entrepreneur being paid for?

Amazon Merch on Demand as an example

A well-known Print on Demand model is Amazon Merch on Demand.

Participants create designs, for example, and make them available to Amazon as part of the programme. They do not have to purchase, manufacture in advance or store the physical products themselves.

The contractual allocation of roles is particularly relevant in this case: in its service agreement, Amazon expressly describes itself as the “Seller of Record”, i.e. the party responsible for selling the products. Among other things, Amazon determines prices, availability, distribution channels and terms of sale and handles payment processing, refunds and customer service.

The participant, on the other hand, receives a royalty for the corresponding sales.

Amazon Merch on Demand therefore differs significantly from traditional e-commerce, where the entrepreneur purchases or manufactures goods and subsequently sells them directly to end customers.

The fact that a physical product featuring a designer's own design is sold does not therefore automatically mean that the designer is the person selling that product to the end customer.

 

Self-employed – but also a retailer?

An important distinction must be made here: the question of whether someone is carrying out a self-employed activity is not the same as determining whether that activity constitutes retail trade.

Anyone who operates a POD business independently and on an ongoing basis from Spain is generally carrying out a self-employed economic activity. However, it must then be determined what type of activity is actually being carried out.

In the case of Amazon Merch on Demand in particular, the sale of physical products alone should not automatically lead to the conclusion that the designer is engaged in traditional retail activity. Rather, the service agreement expressly provides that Amazon is the responsible seller of the products and pays royalties to the participant.

This distinction is relevant in Spain because traditional retail trade in goods may involve additional tax and administrative requirements – for example, the Recargo de Equivalencia (equivalence surcharge regime), as well as product-related requirements.

The actual structure of the business model should therefore be taken into account from the outset when registering the activity.

Conclusion: The business model determines the tax treatment

Print on Demand primarily describes a production model – not a specific type of activity for tax purposes.

An entrepreneur operating their own online shop with an external POD service provider may therefore be classified differently from a designer who receives royalties through Amazon Merch on Demand.

For tax classification purposes, the fact that a physical product is ultimately sold should therefore not be considered in isolation. The decisive questions are:

What service does the entrepreneur personally provide, who sells to the end customer, and what exactly is the entrepreneur being paid for?

Only by examining the specific business model can the activity be classified correctly.

Our firm will be pleased to assist you in analysing your individual situation, carrying out the necessary administrative procedures on your behalf and filing the relevant tax returns. If you are interested in our services or have any specific questions regarding this subject, please feel free to contact us by email or telephone.

Service agreements for businesses:

Appointment for an initial consultation (A, B1, B2)

Self-employed (Autónomos): Bookkeeping, taxes, advisory services

S.L: Bookkeeping, taxes, annual accounts, representation

Author:

Lisa Wörfel
Tax Advisor
info@sspartners.es
Tel: (+34) 951 12 13 06
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