The App Store Tax reduction becomes a reality. “Apple announces App Store Small Business Program” – this headline appeared on Apple’s website yesterday bringing many small and medium-sized company owners a lot of excitement and hope. The released news means that publishers will receive a 15% reduction on the App Store tax from in-app purchases. All this to ensure higher profits for the vast majority of publishers selling applications and services on the App Store.
The program will launch on January 1, 2021, and Tim Cook, Apple’s CEO, said that it has been created to “help developers fund their small businesses, take risks on new ideas, expand their teams, and continue to make apps that enrich people’s lives.”
That’s one small step for Apple, one giant leap for publishers.
Come and see what you need to know about the new App Store tax.
All about Apple App Store tax
The App Store is a digital distribution platform that allows people from all over the world to browse many different kinds of applications and install them on their mobile devices including iPhones and iPads. Despite some apps are free to install they offer in-app purchases. These are transactions of digital goods such as new items in the games, subscriptions for the premium content, etc. Apple takes a significant portion of such revenue which is 30%. It’s been called Apple tax.
However, Apple is not the only platform owner who takes commissions on sales on their own app store platform. Google and Amazon do the same.
That’s how they make money.
There’s no possibility of omitting this fee so you have nothing else to do but accept it.
Apple App Store is the biggest converter to digital goods sales. That’s why mobile developers including digital publishers are expecting Apple to lower the App Store tax in their struggle to maintain their businesses more profitable.
So far, Apple has also charged a 30% fee but it’ll be changed. In reaction to the unprecedented global economic challenge, Apple decided to support publishers by providing them with a reduced commission on paid apps and in-app purchases.
What does it mean for publishers?
In one word – your revenue will increase.
Let me explain this.
Your magazine was published on App Store. When a reader of your publication, paid for the January issue of the magazine, his money didn’t simply go to you. It went to Apple. Then, Apple charged a commission of 30% of the issue price.
You, as a magazine publisher, received 70% of the in-app purchase value.
This is how it was until now, right?
Apple has just announced a special App Store Small Business Program. They decided to reduce a commission from 30% to 15% percent on purchases made in the app.
If you join the program, you will just earn more.
Who can qualify for Apple’s new program?
Despite the fact that Apple announced that the exact details won’t be provided until December, they’ve decided to unveil the essentials of the program’s participation criteria which are easy and clear.
What do we already know?
- Both new and existing publishers who meet the conditions can participate in the program.
- Existing publishers who made up to $1 million in 2020 for all of their apps, regardless of how they monetized them, can qualify for the program and the reduced commission.
- Publishers who surpassed the $1 million will be able to join the program in a future calendar year and requalify for the 15 percent commission the year after.
When can you qualify?
Apple will launch The App Store Small Business Program, on January 1, 2021.
It’s a significant date for publishers who earn less than $1 million this year. They can participate in the program now what guarantees them a reduced Apple commission of up to 15% on paid applications and in-app payments from next year.
Those ones who earn at least $ 1 million on the App Store this year will still need to share 30% of their turnover with Apple. They will not get a chance to lower their “Apple tax” until 2022, but they would have to earn less in 2021.
Will you qualify automatically for the lower App Store tax?
It’s not yet clear if you will need to enroll to access The Small Business Program, to have the Apple tax reduced or will you qualify automatically.