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From Service Provider to Reseller

 

Dear Sir or Madam,

As you know, MyCommerce Share-It has been operating as a Service Provider in connection with supporting your online sales. There was a time when it was reasonable to consider the Service Provider Model as being the model that best met your and MyCommerce Share-It's interests.

As tax laws become more and more complex we have had increasing requests from our clients to change to a true Reseller Model, where MyCommerce Share-It acts as the merchant of record and resells your products to your end users and therefore will be collecting and remitting any tax with respect to the sale to the end user.

In addition, the payment processing and credit card industries have identified the change from a Service Provider to a Reseller to be an urgent requirement for all e-commerce companies processing credit cards on their merchant account. Over the past several months, these payment processors have demanded that MyCommerce Share-It adopt the reseller model as a condition of doing business with us.

Considering this, and other circumstances, which could not have been foreseen by either you or us on the day of signing our contract, we are forced to accommodate the existing agreement with the following terms which will apply to any sales you make through your online store (operated by us) after May 1, 2006:

  • MyCommerce Share-It will be the seller of the software within the same territory covered under our agreement and will disclose this to the end user within the shopping cart.
  • When an end user purchases a product in the online store we operate for you, we will simultaneously buy such product from you at a discount (MyCommerce Share-It Margin Percentage) that is equal to the Service Fee we agreed in our current agreement and resell the products to the end user.
  • MyCommerce Share-It will collect all sales, use and value added taxes in connection with the sale of your product to the end user.
  • MyCommerce Share-It will remit to you the money, and issue a payment report, based on the products sold. We will need your VAT number, or a statement that you have no VAT number because you have no VAT obligations, before we can make payments to you. You can easily update this information in the control panel.
  • To ensure that you, our client, can still have the same access to the end user's account information as today, MyCommerce Share-It, as the seller of the software, will have to make certain standard disclosures related to consumer protection and data privacy laws on the pages hosted by MyCommerce Share-It in relation to the sale of the product.

We are more than happy to discuss any specific questions you may have regarding the above. We see this as an opportunity to better serve you, our clients, and to continue to support your online revenue growth.

Yours sincerely,
John Strosahl
Vice President Europe

 

Answers to Frequently Asked Questions about the Reseller Model

 
The following FAQs aim to provide answers to the questions that may ariseafter you have read the above letter.
 
Background
Why will MyCommerce Share-It stop doing business as a service provider?
Why is this change already taking place on May 1, 2006?
Will any of MyCommerce Share-It's competitors continue to offer a service provider model?
Legal Situation
Do I have to sign a new contract by May 1st due to these changes?
I would like to sign a new contract that expressly includes the change. Is that possible?
What can I do if I do not agree with these changes?
And what happens if I have a contract with element 5 Inc.?
Services
Does the change mean that in the future MyCommerce Share-It will also sell my software in areas not covered by the contract to date?
In the future, who is responsible for the calculation, billing, and remittance of taxes based on the contract with the end customer?
Does the reseller model apply to all products across the board, or can I limit it to certain products?
What will happen with the purchase order payment type?
How will this change things for my customers?
What will change for my customers / in the order process?
Will I continue to receive an e-mail / XML confirmation?
VAT / Sales Tax
VAT / Sales Tax
Why does MyCommerce Share-It need the VAT ID of EU-based software publishers?
Do all software publishers (even non-European ones) need a VAT ID?
Changes in accounting
Changes in accounting
In which languages, currencies, and intervals will the account statements be issued?
How will I receive the PDF File?
Which items will be listed on the PDF File?
Can I review my PDF File?
How will refunds and chargebacks be handled in the future?
Advantages and to-do list
Are there disadvantages to the reseller model?
Is there any extra work I will have to do?
Do software publishers have to change their product settings?
Marketing
How much does the reseller model influence the final sales price?
What will happen with customer data?
Other
Do these FAQs represent legal or tax advice?
Do you have any other questions about the change in our business model?
 
 
-   Why will MyCommerce Share-It stop doing business as a service provider?
 
MyCommerce Share-It is being forced to make this change due to the legal and regulatory changes in the market and, in particular, due to considerable pressure from credit card companies and banks. This move will enable us to preserve the opportunity for credit card payments and protect our business, as well as yours, from a major risk.
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-   Why is this change already taking place on May 1, 2006?
 
For some time now, MyCommerce Share-It has been in negotiations with credit card companies and banks. The attempt to agree to a "milder" transition with all participants turned out to be impossible due to the structure of the credit card business. In addition, the recent shutdown of a competitor in France that we understand was also using the service provider model led us to make a commitment to the credit card companies to convert our business model immediately, in order to protect your business and ours.
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-   Will any of MyCommerce Share-It's competitors continue to offer a service provider model?
 
To our knowledge, there are currently only a few companies left on the market that support a service provider model. Without having access to detailed credit card company /bank plans, we assume that credit card processing at these suppliers is subject to substantial risks, at least in part. We view continued operation under a model that credit card companies have clearly said is against their rules to pose a substantial risk to your ability to do business.
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-   Do I have to sign a new contract by May 1st due to these changes?
 
No, the changes in the attached letter will automatically become a part of your contract as of May 1, 2006.
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-   I would like to sign a new contract that expressly includes the change. Is that possible?
 
Yes. If you have a share-it! developer agreement, you can simply confirm the new reseller developer agreement online in your Control Panel as of middle of April, 2006. If you have signed an e-sales service provider agreement with element 5, we would be happy to provide you with our new standard reseller contract. Please contact your sales representative at sales@shareit.com to take advantage of this option.
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-   What can I do if I do not agree with these changes?
 
As described below, we believe this contractual change provides financial advantages for almost all software publishers. In addition, we expect it to lead to a considerable reduction in administrative effort for you, because handling the complicated relationship with the end customer will in the future be the responsibility of MyCommerce Share-It. Finally, our opinion is that in the medium term, there will be no other credit card association sanctioned alternatives to the reseller model.

We would be happy to clarify any other questions or concerns you may have. If you should still decide against the conversion, and you have not signed a supplementary reseller agreement with MyCommerce Share-It recently, then while we will be disappointed with your decision, we will agree to a mutual termination as of April 30, 2006.

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-   And what happens if I have a contract with element 5 Inc.?
 
In order to simplify the situation considerably, we intend to transfer this contract to element 5 GmbH based on a transfer clause agreed in the contract between you and element 5 Inc. As of May 1, 2006, element 5 GmbH will commit to fulfill all obligations from the contract between you and element 5 Inc. and to release element 5 Inc. from this contract.
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-   Does the change mean that in the future MyCommerce Share-It will also sell my software in areas not covered by the contract to date?
 
No, MyCommerce Share-It will sell the software in the same area agreed in the existing contract with the software publisher.
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-   In the future, who is responsible for the calculation, billing, and remittance of taxes based on the contract with the end customer?
 
The relationship with the end customer, which is complicated in tax and regulatory terms, will be handled in the future by MyCommerce Share-It. We believe this will spare you a substantial amount of administrative effort.
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-   Does the reseller model apply to all products across the board, or can I limit it to certain products?
 
The new reseller model applies to all products as of May 1, 2006.
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-   What will happen with the purchase order payment type?
 
We will continue to offer your customers the purchase order payment type if you currently offer it or if you turn on this option in your Control Panel in the future. As usual, MyCommerce Share-It will process these orders. If the end customer's bill is not paid, we will transfer the claim to you so that the same economic result is achieved as under the service provider model. The end customer will be informed about the opportunity to assign the claim to you in our General Terms and Conditions of Business and our Privacy Policy.
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-   What will change for my customers / in the order process?
 
MyCommerce Share-It will be the seller of the software in the same area agreed in the contract with the software publisher. During the order process, MyCommerce Share-It's General Terms and Conditions of Sale, data protection statement, and distance selling rule disclosures will be displayed in a footer. If local legal regulations require that additional disclosure requirements be posted, we will have the responsibility to do so.
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-   Will I continue to receive an e-mail / XML confirmation?
 
Yes. Nothing will change in this regard either. As usual, you will receive an e-mail or XML notification after payment is received.
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-   VAT / Sales Tax
 
MyCommerce Share-It will be responsible for the settlement of all sales and use, and for the correct calculation of VAT /sales tax in connection with the relevant product sales to end customers.

European Union only:

In order for MyCommerce Share-It to make wire transfers to software publishers based on PDF Files issued, we require the following from software publishers in the EU only:

  • a VAT ID or
  • a certificate indicating that you are not VAT liable

Please note that we cannot make payments to software publishers domiciled in the European Union that do not provide the above-mentioned data or evidence. You can easily enter your VAT ID (or indicate your VAT exemption) in your Control Panel.

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-   Why does MyCommerce Share-It need the VAT ID of EU-based software publishers?
 
This VAT number is necessary so that MyCommerce Share-It can meet the latest legal requirements with regard to the issuance of correct documentation in compliance with tax regulations. Without correct documentation, we cannot issue payments for legal reasons.
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-   Do all software publishers (even non-European ones) need a VAT ID?
 
No, VAT IDs are currently only required for EU residents due to accounting regulations within the EU.
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-   Changes in accounting
 
The summary reports that we regularly mail out to you will have only a few minor content changes. However, the information provided to you will continue to be the same as you received in the past. You do not need to do anything to keep receiving these.

In order to maintain existing business processes, the necessary accounting documents will be automatically generated by MyCommerce Share-It and sent to you after the end of an accounting period. Attached to the summary report, you will also receive a PDF showing what we will pay you at the time defined in your contract. The deduction of our margin (formerly our service fee) will be considered in the PDF.

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-   In which languages, currencies, and intervals will the account statements be issued?
 
There will be no change from current procedure.
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-   How will I receive the PDF File?
 
You will receive the PDF Files by e-mail attached to your summary report.
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-   Which items will be listed on the PDF File?
 
The PDF File will list the total proceeds from your product sales within the payment cycle. This sum equals the product revenue generated by MyCommerce Share-It less the margin (formerly service fee) deducted by MyCommerce Share-It. A detailed listing of these items will be contained in a separate e-mail with the summary report. MyCommerce Share-It takes into account country-specific tax and /or VAT regulations when preparing the PDF Files, i.e., the VAT rate listed will correspond to that of your business domicile. If you inform us, we will also honor tax exemptions.
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-   Can I review my PDF File?
 
This control mechanism remains the same, because you can compare key lists, for example, in the Control Panel, or simply review the details of the summary report. All of the documents and functions used to date will continue to be available.
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-   How will refunds and chargebacks be handled in the future?
 
Existing business processes will not change with regard to refunds and chargebacks.
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-   Are there disadvantages to the reseller model?
 
We do not think so. On the contrary, the following points speak in favor of the reseller model.
  • We believe your tax returns will be simplified considerably due to the fact that MyCommerce Share-It will now be responsible for calculating taxes with respect to the end customer and the software publisher will receive payment based on a PDF File generated by MyCommerce Share-It.
  • The business relationship between MyCommerce Share-It and the end customer will be more transparent, which will be more appealing to credit card companies and regulators, and may also help decrease chargeback rates.
  • While the agreed fee /margin percentage will stay the same in nearly all cases, the margin retained by MyCommerce Share-It under the reseller model will be lower than the service fee in place to date. This is because the percentage margin, like the percentage service fee, will be calculated based on the gross selling price, plus shipping costs. Because element 5 GmbH is domiciled in Germany, end customers within the EU will be charged 16% VAT according to the current effective rates. This will reduce the gross selling price, and therefore our margin, in nearly all cases*. The result is an incremental increase in the total money paid to you!
  • Due to the order process set up by MyCommerce Share-It, you will continue to receive data on your end customers.

* Exception: Cyprus and Luxembourg; Spain remains the same.

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-   Is there any extra work I will have to do?
 
Maybe. For clients in the European Union, we must require the one-time submission of a VAT ID or a document that states that you are not obligated to levy VAT. The VAT ID can conveniently be entered in the Control Panel. Moreover, you should inform your accountant about the change in our business model, because MyCommerce Share-It is now your customer, not the end customer. As outlined above, we will issue payments to you on the basis of PDF Files, which means your payment schedule will remain the same and that we do not need any invoices from you.
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-   Do software publishers have to change their product settings?
 
No. All necessary parameters to ensure the same processes will be set by MyCommerce Share-It. In exceptional cases, our team may contact you.
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-   How much does the reseller model influence the final sales price?
 
For anti-trust reasons, you can only give MyCommerce Share-It "non-binding recommended prices" for the sale of your products, which means that MyCommerce Share-It is technically free to set a price vis-à-vis the end customer. On the other hand, MyCommerce Share-It assumes that software publishers know their products and potential market prices best, and that the prices proposed by software publishers represent appropriate market prices. In practice, our policy is to adhere to the non-binding recommended prices that software publishers will manage in the Control Panel as usual.
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-   What will happen with customer data?
 
Based on the order process set up by MyCommerce Share-It and the Privacy Policy posted there, software publishers will continue to receive data on their end customers. MyCommerce Share-It will use this data in the same way as we have to date, as well as continuing to comply with data protection laws.
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-   Do these FAQs represent legal or tax advice?
 
No. Please note that the above explanations are simplified, and do not constitute legal or tax advice. If you have specific concerns, we recommend that you contact your tax advisor, for example, for tax advice that is tailored to your personal situation, because MyCommerce Share-It is not permitted to provide such advice.
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-   Do you have any other questions about the change in our business model?
 
If you have further questions, please contact us via e-mail by replying to the e-mail address listed in the newsletter.
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