Inside DAC7: The EU’s Newest Tax Directive & Its Implementation Status [March 2023]
The EU’s newest tax directive, DAC7, which applies as of 1 January 2023, imposes new obligations on online marketplaces that have sellers based in the EU.
SUCCESS STORY
Soundrop
All Gain, No Pain: Music Distribution Platform Soundrop Gets Tax Compliant With Trolley
22 locations
Soundrop delivers its artists' music to 22 music stores, DSPs, and social media platforms
$20 million+
earned by Soundrop artists in 2021
220+ Countries
Soundrop is now able to pay, including 100+ countries that cannot receive PayPal payments
Soundrop
Company Info
Website
Industry
Music royalties, digital music distribution
HQ Location
Portland, Oregon
Customer Since
2021
Recipients
Independent recording artists, musicians, rights holders
Payout Countries
Global
Getting songs onto platforms like Spotify, Apple Music, and TikTok is difficult for independent artists to do by themselves. Working with a distributor makes this much easier, but not all digital distributors are created equal—they can leave artists on the hook with subscription payments or paying fees to receive their hard-earned royalties.
Getting songs onto platforms like Spotify, Apple Music, and TikTok is difficult for independent artists to do by themselves. Working with a distributor makes this much easier, but not all digital distributors are created equal—they can leave artists on the hook with subscription payments or paying fees to receive their hard-earned royalties.
Soundrop is an artist-centric platform for independent musicians to monetize their talent without the headaches of royalty administration or licensing. Artists simply upload their music directly to Soundrop for a 99-cents-per-track flat fee. This secures their song license, automatically pays mechanical royalties to songwriters, and distributes to artist-designated platforms.
Artists can even split their royalty payments among contributors so all relevant parties receive their share every month without a headache or extra fee.
Soundrop is an artist-centric platform for independent musicians to monetize their talent without the headaches of royalty administration or licensing. Artists simply upload their music directly to Soundrop for a 99-cents-per-track flat fee. This secures their song license, automatically pays mechanical royalties to songwriters, and distributes to artist-designated platforms.
Artists can even split their royalty payments among contributors so all relevant parties receive their share every month without a headache or extra fee.
Our priority was to quickly onboard users and issue 1099s & 1042s in the 2021 tax year, a target we could not have met with in-house development. We were able to do this with Trolley.”
Morgan Levy — Director of Product at Soundrop
Founded in 2011, Soundrop was acquired by CD Baby in 2016 and has grown quickly, expanding its reach from 7 to 22 music stores. Artists of all genres work with Soundrop, from experimental to video game music to high-earning, high-profile independent artists (like pop duo Pomplamoose or Grammy-nominated singer Aloe Blacc).
“We are focused on making music distribution and monetization accessible to artists who don’t have a traditional label or distribution deal,” says Morgan Levy, Director of Product at Soundrop. “A lot of our artists make a good living doing this.”
“We are focused on making music distribution and monetization accessible to artists who don’t have a traditional label or distribution deal,” says Morgan Levy, Director of Product at Soundrop. “A lot of our artists make a good living doing this.”
The Challenge
Soundrop pays thousands of its artists monthly, remitting payments around the globe. They have seen continuous growth in both the volume and total number of payouts, but still they had a goal to reach artists in more countries while ensuring tax compliance struck all the right chords.
"We’ve really expanded our footprint and extended our reach into more countries. It frees up time which can be devoted to rolling out new features for our users. That’s my favorite part of Trolley."
Until September of 2021, Soundrop sent payments via PayPal and paper cheques. Between the time and expense of making payments this way, Soundrop wanted to upgrade and automate their processes.
On top of this, artists, especially those in countries where PayPal isn’t accepted, were asking for a direct deposit option. With these concerns in mind, Soundrop began the search for partners to improve and expand their artist payment options.
Soundrop was also looking for a tax solution to issue 1099 and 1042 forms to all their artists earning over a certain threshold. Imagine their delight when they discovered a solution that incorporated both payment options and a tax solution.
On top of this, artists, especially those in countries where PayPal isn’t accepted, were asking for a direct deposit option. With these concerns in mind, Soundrop began the search for partners to improve and expand their artist payment options.
Soundrop was also looking for a tax solution to issue 1099 and 1042 forms to all their artists earning over a certain threshold. Imagine their delight when they discovered a solution that incorporated both payment options and a tax solution.
A Solution for Payouts & Taxes
Currently, most of the Soundrop artist base is paid through PayPal, a process Soundrop can manage directly through the Trolley platform. The remaining artists are also paid via Trolley but can receive payment directly to their bank account.
“In certain regions, artists cannot be paid through PayPal. By adding Trolley, and with it, direct deposit, we’ve unlocked all new geographies. It’s really exciting to see,” Levy says.
To issue the correct tax forms, Soundrop needed artists to provide their tax information quickly so they didn’t miss receiving a monthly royalty payment. Trolley’s simple interface made that speed possible. “With the widget, the flow is very simple,” Levy explains. “Setup for payments and tax information is in one place. Most artists have a simple tax situation, so it’s easy for them to onboard or update their information.”
Critical to saving Soundrop time is Trolley’s Invoices feature. Rather than sending individual transfers based on tax category, Invoices allows Soundrop to make consolidated payments that clearly break down the tax reportable and non-reportable portions. Because Soundrop felt strongly about keeping payment fees as low as possible for their artists, “the ability to make a single payment built from multiple transactions reduces the cost of doing business. It’s been really big for us,” Levy shares.
“In certain regions, artists cannot be paid through PayPal. By adding Trolley, and with it, direct deposit, we’ve unlocked all new geographies. It’s really exciting to see,” Levy says.
To issue the correct tax forms, Soundrop needed artists to provide their tax information quickly so they didn’t miss receiving a monthly royalty payment. Trolley’s simple interface made that speed possible. “With the widget, the flow is very simple,” Levy explains. “Setup for payments and tax information is in one place. Most artists have a simple tax situation, so it’s easy for them to onboard or update their information.”
Critical to saving Soundrop time is Trolley’s Invoices feature. Rather than sending individual transfers based on tax category, Invoices allows Soundrop to make consolidated payments that clearly break down the tax reportable and non-reportable portions. Because Soundrop felt strongly about keeping payment fees as low as possible for their artists, “the ability to make a single payment built from multiple transactions reduces the cost of doing business. It’s been really big for us,” Levy shares.
“Using Trolley for payouts has significantly cut down the manual processing time required of our accounting teams. We estimate we’re saving each person on our team of four at least a day’s work per payment run.”
Their accounting team has also become more efficient. “Using Trolley for payouts has significantly cut down the manual processing time required of our accounting teams,” Levy says, “We estimate we’re saving each person on our team of four at least a day’s work per payment run.”
Partnering with Trolley paved the way for Soundrop to streamline their tax compliance processes. “All artists, whether they’re located in the USA or overseas, who earn above certain thresholds require an appropriate tax form. This means all of our artist base needs a form on file,” Levy shared. “It was important that we can collect and remit tax forms easily.”
“We chose Trolley because they had those abilities, could tie payments directly to their tax purposes for a smoother end-of-year process, and were open to feature requests.”
For example, when Soundrop started with Trolley, they had to review every submitted tax form that raised any kind of flag, which was not sustainable for their team. Soundrop requested the ability to set different approval settings and automatically bypass certain warnings.
“That new feature was delivered very quickly, which saved our trust & safety team hours of manual labor,” Levy notes. “Our priority was to quickly onboard users and issue 1099s & 1042s in the 2021 tax year, a target we could not have met with in-house development. We were able to do this with Trolley.”
Partnering with Trolley paved the way for Soundrop to streamline their tax compliance processes. “All artists, whether they’re located in the USA or overseas, who earn above certain thresholds require an appropriate tax form. This means all of our artist base needs a form on file,” Levy shared. “It was important that we can collect and remit tax forms easily.”
“We chose Trolley because they had those abilities, could tie payments directly to their tax purposes for a smoother end-of-year process, and were open to feature requests.”
For example, when Soundrop started with Trolley, they had to review every submitted tax form that raised any kind of flag, which was not sustainable for their team. Soundrop requested the ability to set different approval settings and automatically bypass certain warnings.
“That new feature was delivered very quickly, which saved our trust & safety team hours of manual labor,” Levy notes. “Our priority was to quickly onboard users and issue 1099s & 1042s in the 2021 tax year, a target we could not have met with in-house development. We were able to do this with Trolley.”
The Future
“Now that we’re dedicating less resources to maintaining a payment system, we have been able to move on to other exciting development opportunities,” Levy shares. “We’re focused on increasing earnings for our artists through global licensing expansions and other new revenue opportunities.”
Because their teams are always looking to grow monetization opportunities for their artists, Trolley will be an important factor in scaling as Soundrop encounters more and bigger payouts. But one thing Soundrop knows for sure: Trolley will be crucial to reaching musicians in every corner of the globe. Levy sums it up: “As our artists’ earnings continue to grow, Trolley allows us to easily and reliably deliver larger, more frequent payouts.”
Because their teams are always looking to grow monetization opportunities for their artists, Trolley will be an important factor in scaling as Soundrop encounters more and bigger payouts. But one thing Soundrop knows for sure: Trolley will be crucial to reaching musicians in every corner of the globe. Levy sums it up: “As our artists’ earnings continue to grow, Trolley allows us to easily and reliably deliver larger, more frequent payouts.”
“We’ve already recommended Trolley, and some of our [Downtown Music Group] sister companies are onboarding now. We’ve been really happy with the collaboration and support from the Trolley team.”
