Updates on DistroKid’s tax withholding controversy

This is a follow-up of my previous post about DistroKid, regarding a recent controversy of lacking transparency on a newly introduced tax withholding practice, resulted in some, but not all, DistroKid users receiving royalties less than requested without proper explanation.

A Brazillian YouTuber Dan Vasc published a video “I WAS ROBBED | DistroKid Steals Money From Musicians” in May, explaining in details how he received his royalties $3,000 short from DistroKid and how DistroKid responded to his enquires.

After the video went viral, Dan posted a comment on his video saying that DistroKid has returned his money and he will post another video for the details about this.

Dan posted this follow-up video, DISTROKID Returned My Money… But I Won’t Keep It, two days ago, on 29 Jun 2020.

In the video, Dan mentioned that he has tried getting in touch with DistroKid and the Founder/CEO, Philip Kaplan, a few weeks before his previous video, but nothing was replied. However, a few hours after the previous video went viral, the founder, Philip Kaplan reached Dan via twitter.

Dan has shared the screenshots of their conversation with the video, which show the entire communication between Dan and the DistroKid founder, Philip Kaplan.

It’s worth to read through the whole communication, though it’s a bit long so I summarise it as below.

Here’s what happened:

Philip Kaplan, the founder of DistroKid said:

• I didn’t see the email or I’d have replied
• I’m your fan and a metal guy too, see me drumming here (with a link)
• I love Brazil and the band Seputura (he even spelt it wrong, should be Sepultura), and Brazil was the first country I promoted DistroKid
• Thank you for pointing out the issues that our FAQ is confusing
• I’m told by the largest accounting firm in the US that the tax issue affects all distributors in the US
• The money goes to the US government, not distributors
• Your issue with us doesn’t affect too any DistroKid users
• I’m just a computer programmer not a tax pro
• I think I have made the best distributor in the world
• I’m just a small company and there are ways to improve
• Your video hurts but I can learn from it
• I’m happy to personally pay you the tax withhold as a ‘thank you’
• Unrelated, I’d love to drum on a track with you singing

Dan replied:

• I appreciate you acting like an actual person talking to another person
• There are hundreds of musicians who had similar issues with DistroKid but are voiceless
• DistroKid’s irresponsible decisions hurt DistroKid, not my video
• I don’t believe DistroKid is legally forced to take money from people. Because:

1. The legislation was in 2016 but you haven’t been practising it since
2. Other American companies don’t take tax money from me, for example, YouTube and Patreon
3. Selling music download or streaming constitutes mechanical royalties and is not derived from an intangible asset, and is not subject to the legislation

• Even if you’re forced to do the practice, you can’t excuse your lie on the front page or breaking the words with the clients, both cases say users keep 100% of the royalties
• Not giving foreword of warning of the practice change showing a profound lack of respect and regard for the clients
• You should give at least a prior warning to the clients to inform the change in practice, even if that would cost you clients
• I’m a businessman too
• Yes, please return the money that you stole from me
• How about other musicians? Are you going to return their money too?
• Would you stop falsely advertising that musicians receive 100% of the earning?
• I won’t remove the video in any case, I will make another video to explain everything in detail
• I suggest you use the opportunity to show that DistroKid can do better

Philip then replied:

• To be clear — I (the founder) personally pay you $3,517.86, not DistroKid
• The $3,517.86 was paid twice, to the IRS and to you
• See me drumming in the office (with a link)
• See I added “(after PayPal fees or any taxes or whatnot)” to the end of the “Upload as much as you want, keep 100% of your earnings” on the front page

Yet, the founder gave no response to whether DistroKid will return the tax withholding to other musicians, as they did in response to Dan’s viral video. The founder also gave no explanations or further details about the newly introduced tax withhold practice despite the legislation has been in place since 2016.

DistroKid gave no explanation about false advertising or broken agreement, which are the major part of the controversy.

Dan donated the money returned by DistroKid to a local child cancer foundation in Brazil.

What’s your opinion about this controversy? Personally, I will stay away from DistroKid, not only because of this tax withholding controversy, but also lack of transparency in general.

Read my another post for elaboration: 6 Pitfalls to Know About Distrokid

For alternatives of DistroKid: DistroKid vs. CD Baby vs. EmuBands and more — My Experience with Music Distributors

For background information about digital distribution: How to Release Your Music on Spotify and Apple Music?