# V5 UGC Marketplace — Legal & Compliance Layer plan-id: `v5-ugc-marketplace-compliance.v1` Status: Draft for review — fills audit gap V1_V7_PLAN_SET_AUDIT_2026-06-12 §6.2 ("no DMCA agent/process or minors-as-sellers policy for a 70%-share paid-mod marketplace"). **Every tax and legal position below is a planning position requiring outside-counsel sign-off before the marketplace takes its first real dollar**; positions are labeled planning assumptions where adopted without counsel. Owners: Commerce Counsel (overall), Trust & Safety Lead (DMCA operations), Finance Operations (tax reporting + withholding), Marketplace Engineering Lead (KYC/payout gates in the `workshop` service), DPO (data handling in KYC). Grounding: `V5/V5_features.md` §"Workshop & Mods" (paid-mod marketplace, 70% creator share, KYC/tax-interview/refund-window/payout/reserve gates; three-layer moderation with DSA-compliant appeals; copyright-safe rules + known-infringing hash list) and `V5/ue/Plugins/V5Mode_Editor_Workshop/Content/Data/year1_modder_marketplace_manifest.json` (creator 7000 bp / platform fee 2000 bp / creator fund 500 bp / chargeback reserve 300 bp / tax-withholding reserve 200 bp; $25.00 minimum payout; 30-day payout cadence; 48-hour refund window; `creatorKycRequired`, `taxInterviewRequired` already enforced as listing gates). --- ## 1. Marketplace legal posture - The platform operates the paid-mod marketplace as a **marketplace facilitator / merchant of record** for buyers (we charge the buyer, we grant the entitlement, we handle refunds), and licenses creator content under a non-exclusive distribution license in the Creator Agreement. Creator payments are structured as **content-license royalties** (planning assumption adopted 2026-06-12; the alternative TPSO characterization is analyzed in §4.1 — counsel must confirm the characterization because the 1099 regime depends on it). - Workshop content is data-only by spec; the marketplace sells only moderation-approved, KYC-verified, tax-interviewed listings — these are already hard gates in the manifest and the `workshop` service contract. ## 2. DMCA — Agent, Takedown, Counter-Notice ### 2.1 Designated agent - Register a **DMCA designated agent with the US Copyright Office** (online directory, $6 fee, renewable every 3 years) **before the marketplace or public workshop opens** — registration is a precondition to §512 safe harbor. Owner: Commerce Counsel; target: with the closed-beta workshop opening (2026-11), not launch. - Public intake: `dmca@` mailbox + a structured web form on the creator hub; agent name/address mirrored in the ToS and on the workshop "report" surface. - Adopt and publish a **repeat-infringer policy**: 3 upheld infringement takedowns in 12 months → marketplace selling ban; 5 → workshop publishing ban (account-level, integrates with the existing creator-standing throttle). Required for safe harbor (§512(i)). ### 2.2 Takedown SLAs | Step | SLA | | --------------------------------------------------------------------- | ------------------------- | | Acknowledge a facially valid §512(c)(3) notice | 1 business day | | Remove/disable the listing ("expeditious" removal) + notify uploader | 3 business days, 24 h for exact-hash matches against the known-infringing list | | Forward the notice to the uploader with counter-notice instructions | with removal | | Restore on valid counter-notice if no suit filed | 10–14 business days after counter-notice (per §512(g)(2)(C)) | | Invalid/incomplete notices | reply requesting required elements; clock starts on completion | - Paid items: on takedown, **sales stop immediately**; revenue already booked for the disputed item moves to held status (paid from the chargeback/tax reserves mechanics, §6) pending resolution; buyers keep entitlements unless a court order requires revocation, in which case refunds issue at platform expense. - The ML pre-screen and known-infringing hash list (features§"Workshop & Mods") are **proactive filtering, not a substitute** for notice-and- takedown; both pipelines log to the same moderation case system. - EU: the DSA notice-and-action path the spec already mandates handles EU notices; counter-notice and out-of-court dispute settlement per DSA Art. 20–21 ride the existing appeal flow (7-day SLA). ### 2.3 Counter-notice and abuse - Counter-notices via the same form; §512(f) misrepresentation warnings shown on both notice and counter-notice forms. - Takedown-abuse detection: a notifier whose notices are >50% rejected/ counter-noticed-unchallenged over 10+ notices is flagged for manual review and may be deprioritized to manual-only processing (DSA Art. 23 "frequently submitted manifestly unfounded notices" analog). ## 3. Minors as Sellers Planning assumptions adopted 2026-06-12, COPPA/GDPR-consistent and chosen for launch simplicity over maximal inclusion: | Age (at account, verified at KYC) | Free workshop publishing | Paid marketplace selling | Payouts | | --------------------------------- | ------------------------ | ------------------------ | ------- | | Under 13 | **No** (COPPA path already restricts social/creation surfaces, features§"Privacy Compliance") | No | No | | 13–17 | Yes, with verifiable guardian consent where required by local law (GDPR Art. 8 age-of-consent varies 13–16 by member state — geo-gated) | **No** | No | | 18+ | Yes | Yes (after KYC + tax interview) | Yes | - **Age floor for selling: 18.** Rationale: contracts with minors are voidable in most jurisdictions; KYC vendors cannot reliably verify minors; tax interviews (W-9/W-8) require capacity to sign; guardian-custodied earnings create escheat/UTMA complexity not worth carrying at launch. - Guardian-mediated seller accounts (guardian completes KYC, holds the payout account, co-signs the Creator Agreement) are **deferred to a post-launch review** (target: Season 2 scoping) — explicitly a deferral of new capability, not of compliance for shipped capability. - Enforcement point: the existing `creatorKycVerified` gate — KYC (§5) fails closed for under-18, which automatically blocks listing (the manifest already requires KYC before any paid listing). - If KYC reveals an existing paid seller is under 18: listings unpublish, buyers keep entitlements, accrued earnings are held until the creator turns 18 or a guardian claim process completes (not forfeited — earned funds belong to the creator). ## 4. Tax-Jurisdiction Matrix All rows are planning positions adopted 2026-06-12, pending counsel and a tax engine integration (Finance Operations owns vendor selection by 2026-09). ### 4.1 US information reporting - **Characterization** (drives everything): creator payments as **royalties** → **Form 1099-MISC box 2**, threshold **$10**/year, for US persons (W-9 on file from the tax interview). Practical effect: nearly every US creator with any sales gets a 1099-MISC. - Alternative characterization: if counsel concludes the platform is a third-party settlement organization, the regime is **1099-K**, threshold **$20,000 AND 200 transactions** per year (the 2025 One Big Beautiful Bill Act reinstated the $20k/200 threshold, reversing the ARPA $600 phase-down) — materially fewer forms. The tax interview collects enough (W-9 TIN, address) to support either regime; engineering builds to the stricter 1099-MISC/$10 assumption so a late characterization change is a reporting-config change, not a data-collection change. - Backup withholding: missing/invalid TIN → **24%** backup withholding, funded operationally from the 200 bp tax-withholding reserve and trued up against the creator's payouts. - State: file where required by state 1099 thresholds (engine-driven). ### 4.2 Non-US creators — US withholding - Tax interview collects **W-8BEN / W-8BEN-E**; default **30% withholding on US-source royalty income**, reduced by treaty (typical royalty rates: UK, DE, FR, JP, CA → 0%; IN → 15%; no-treaty → 30%). - **Sourcing position** (planning assumption adopted 2026-06-12): royalties are sourced where the content is used → only the **US-buyer share** of a non-US creator's revenue is US-source and withholdable. Implementation: per-listing revenue is already attributable to buyer storefront country; withholding applies to the US-buyer slice. Counsel must confirm; the conservative fallback (withhold on 100%) over-withholds treaty-eligible creators and would be a creator-relations problem — flagged as a decision needed by 2026-10. - Annual **Form 1042-S** to each non-US payee; Form 1042 filing. ### 4.3 EU — DAC7 platform reporting - The marketplace is a **reporting platform operator** under DAC7 for EU-resident sellers. Digital-content licensing is treated as in-scope (personal-services/goods classification is genuinely ambiguous for digital content — planning assumption adopted 2026-06-12: **report all EU sellers**, since the goods de-minimis carve-out (<30 sales and ≤€2,000) may not apply to our supply type; over-reporting is the safe side). - Collect at tax interview for EU creators: legal name, primary address, TIN(s) + member state, VAT ID if any, date of birth (also feeds §3), and financial-account identifier used for payouts. - Report annually by **31 January** for the prior year to the elected member state of registration (planning assumption: register in **Ireland**, where the EU establishment for the storefront is expected — Commerce Counsel to confirm with the corporate-structure decision). - Seller non-cooperation: DAC7 requires payout freeze/account closure after two reminders + 60 days without required data — wire this into the KYC gate states. ### 4.4 VAT / GST — deemed supplier treatment - Paid mods are **electronically supplied services (ESS)** for VAT purposes. - **EU**: B2C sales via the marketplace make the platform the **deemed supplier** (Art. 9a of the VAT Implementing Regulation — the platform sets terms and processes payment, so the presumption is not rebuttable in practice). Platform charges the buyer's member-state VAT rate and remits via **OSS** (Union scheme through the EU establishment). Creator→platform leg is out of scope of buyer VAT; EU-business creators self-handle their own VAT on the royalty stream per their local rules (guidance page, not tax advice). - **UK**: same marketplace-liability outcome; UK VAT registration + returns. - **US**: marketplace-facilitator laws now exist in every sales-tax state — platform collects/remits where digital goods are taxable (engine-driven taxability matrix; digital-goods taxability varies by state). - **Japan**: the 2025 platform-taxation regime makes large digital platforms liable for consumption tax on foreign sellers' B2C digital supplies — treat the platform as liable (planning assumption; threshold ¥5B in-scope supplies — verify applicability with counsel). - **Other launch markets**: Canada (GST/HST digital regime), Australia/NZ (GST on remote services), South Korea, Brazil — engine-driven; the price the buyer sees is tax-inclusive where local practice requires (EU/UK/AU/NZ), tax-added where US-style. - VAT/GST is charged **on top of / inside the buyer price and never reduces the creator's 70% revenue-share base**, which is computed on the tax- exclusive sale amount (matches the manifest's basis-point split summing to 10000 over the net price). ## 5. KYC Tiering by Earnings KYC vendor performs document + liveness verification, sanctions/PEP screening (OFAC, EU consolidated list), and re-screening on list updates. The manifest's `creatorKycRequired` gate maps to Tier 1+. | Tier | Trigger | Requirements | Capabilities | | ---- | ----------------------------------------- | ---------------------------------------------------------------------------------------------- | ----------------------------------------- | | 0 | Free publishing only | Account in good standing; age/consent per §3 | Free workshop items; no paid listings | | 1 | First paid listing | Full KYC (government ID + liveness), sanctions screen, tax interview (W-9/W-8 or non-US equivalents), payout account name-match | Paid listings; payouts ≥ $25 on 30-day cadence | | 2 | Lifetime gross > $10,000 | Re-verification, proof of address, enhanced sanctions re-screen, bank-account micro-deposit verification | Continued payouts; eligible for featured-creator program | | 3 | Rolling 12-month gross > $100,000 | Enhanced due diligence (source-of-content attestation, business-entity docs if applicable), annual re-KYC, manual Finance review of payout pattern | Negotiated payout terms (e.g., 15-day cadence) | - Failure/expiry at any tier → listings stay live for 30 days with payouts held, then unpublish (fail-closed); sanctions hit → immediate freeze + mandatory review, no auto-unfreeze. - KYC data handling: stored by the vendor, not in V5 services; the `workshop` service stores only tier, status, and expiry (DPO-approved data-minimization posture; DSAR flows via the existing `compliance-dsar` service). ## 6. Refunds, Chargebacks, and the Creator Reserve The manifest already specs: 48-hour refund window, 300 bp chargeback reserve, 200 bp tax-withholding reserve, $25 minimum payout, 30-day payout cadence. This section defines how they interact: - **Refund (within 48 h)**: full buyer refund; the revenue-share booking for that sale reverses entirely (creator 70%, platform 20%, fund 5% all reverse). No reserve impact — refunds inside the window are a booking reversal, not a loss event. Anti-abuse: a buyer refunding >5 marketplace items in 30 days or refunding >50% of purchases loses self-serve refunds (manual review path remains, and statutory refund rights — e.g., EU 14-day withdrawal where it applies pre-download/consent — are never blocked). - **Refund after 48 h** (support-granted exception, e.g., item broken by a game patch): platform-funded; does **not** claw back the creator share when the cause is a platform-side change; claws back when the cause is a creator update that broke the item (creator notified with the linter evidence). - **Chargeback**: the full sale reverses + the processor fee. Recovery order: (1) the creator's 300 bp rolling chargeback reserve, (2) offset against future payouts, (3) platform absorbs if the creator account is closed with insufficient reserve. The reserve is **rolling 90-day**: each payout period's 300 bp holds for 90 days, then releases into the next payout. - **Chargeback-rate gate**: a listing or creator exceeding **1.0% chargeback rate** over 90 days (min 100 sales) enters review — possible causes are fraud, misleading listing, or stolen-card farming (also a §7 RMT signal in the economy doc); review can raise that creator's reserve to 1000 bp or suspend selling. - **Tax-withholding reserve (200 bp)** funds backup/NRA withholding remittance timing gaps (§4.1, §4.2); trued up quarterly per creator; excess releases with the regular payout. - **Disputed-content holds** (DMCA §2.2) hold only the disputed listing's unpaid earnings, not the creator's whole balance, unless the repeat- infringer policy triggers. ## 7. Pre-launch compliance gates Each is a launch-readiness-style gate for the marketplace surface (owner in parentheses): 1. DMCA agent registered + repeat-infringer policy published (Commerce Counsel) — before closed-beta workshop, 2026-11. 2. Creator Agreement + tax interview flows reviewed by counsel; royalty-vs- TPSO characterization confirmed (Commerce Counsel + Finance) — 2026-10. 3. Tax engine integrated and certified against the §4.4 matrix for all launch storefronts (Finance Operations) — 2027-01. 4. KYC vendor live with tiering + sanctions re-screen webhooks (Marketplace Engineering Lead) — 2026-11. 5. DAC7 registration completed; first reporting dry-run on beta data (Finance Operations) — 2027-02. 6. Under-18 fail-closed path tested end-to-end, including the existing-seller discovery flow (Trust & Safety Lead) — 2027-01.