Category: Taxes

Basecamp CTO David Heinemeier Hansson, developer of the Hey.com e-mail service, calls Apple’s behavior like a thug. What caused it?

Hansson’s statement came after Apple refused to fix a bug and forced Basecamp to give Hey customers the option to subscribe to the service via the App Store.

“I was very surprised at the threat. I think it should be disguised as a threat disguised by eufinism or the like,” Hansson said.

Apple’s Strict Rules

Apple does require application developers on the App Store to follow strict rules. Including requiring developers to provide in-app purchase options if they want to offer content that could previously be purchased through other platforms.

Hey.com is an email service that was recently launched. They offer alternative Gmail services at a cost of USD 99 each year. But now, they only provide subscription options via the site.

The Problem

Apple originally gave this application permission to display on iOS. But according to Hansson, when Hey asked for a bug fix, the request was rejected because they didn’t provide the in-app purchase option through the App Store, and then the Hey app update was rejected by Apple.

“Like the mafia, they contacted us by phone. Stating that, first, they broke our window by refusing a bug fix request). Then, without euphemism (a more subtle phrase), they said they would burn our shop (by removing our application), unless we pay, “Hansson wrote on his twitter.

Reported by Detik website, most developers make the in-app purchase option through the App Store the last resort for monetizing their services. Because Apple applies a ‘tax’ of up to 30% for every digital purchase transaction made through the App Store.

An example is Netflix, which has no longer offered a subscription option through the App Store since 2018. Then there is also Spotify who claims to have to increase its service subscription fees to cover their lost income from Apple’s tax deductions.

There are still many more developers who complain about Apple’s tax scheme, and Apple is still unmoved by this rule, even though they actually provide relief for a number of applications or free them from the tax.

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Remember your first paycheck and how shocked you were when you noticed how much was being taken out for taxes?  My son had the shock of his life when he saw his first paystub for his summer internship at Textron, Inc.   Although he instructed his HR department to withhold the minimum amount out of his paycheck due to his small amount of income (he is getting paid $16.50/hr.), his effective Federal tax rate was well over 20%.

It turns out that his housing and relocation subsidy of $2,500 had an automatic withholding of 25%.  Per federal tax law, if you have any supplemental wages, outside of your regular salary, the federal government can withhold taxes at a different rate.  Supplemental wages generally include commissions and bonuses, sick leave payments, reimbursements of nondeductible moving expenses, and taxable fringe benefits.  There are two methods of withholding, but if the supplemental wages are paid separately, they may be taxed at the IRS flat supplemental rate which is 25 percent. Supplemental wages are also subject to Social Security, Medicare, and FUTA taxes.

So in my son’s case, since the company paid him a lump sum of $2,500 for relocation expenses, that amount had 25% automatically deducted from his first paycheck.  Going forward, he will have a lower amount withheld, and then he will get a large refund when files his 2014 tax return.  My son was not happy that he would have to wait for the tax refund, but he will ultimately get most of this money back in the end.  For more info on supplemental wages click here.

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