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Marketplace reporting obligations – USA

By / In MARKETPLACES / January 29, 2024

Platforms facilitating sales of goods or services in the US market need to send every year an information report about income sellers/ merchants received via the platform the name of the report is Form 1099-K. This is an analog of DAC7 return in the EU

 

This type of report is not only for online platforms but for payment card companies, payment apps, and payment processors like PayPal. Both domestic and foreign online platforms need to submit 1099-K return when they operate on the US market – have buyers in the USA.

 

Reporting thresholds. Reportable sellers 

Marketplaces need to report all sellers with a gross amount of transactions bigger than the threshold. In 2023 threshold is 20 thousand USD. 

 

2023 Reporting period 2024 Reporting period 2025 Reporting period
Merchant’s gross payouts $20 000 $5000 ? not yet legally approved  $600
Number of transactions 200 0 0

 

As the IRS tries to make a transitional period easy for businesses tax authority already postponed the 600-dollar threshold, $5000 threshold for the year 2024 is under consideration by the tax office. Sign up for our newsletter to receive news when the matter will be settled. 

 

Additionally, Form 1099-K does not include the sales tax when it is automatically collected and remitted by eBay.

 

Merchant diligence

Online platforms need to collect from each merchant one of the numbers: SSN, EIN, or ITIN.

Marketplace is not required to file Form 1099-K for payments to a seller with non-US resident address. In such case, a marketplace needs to collect respective W-8 form.

Certificate of Foreign Status of Beneficial Owner for the United States. W-8 form must be collected by the online platform no later than 90 days after the first transaction. 

 

What information must marketplaces report? 

  • Name of the seller;
  • Seller’s address;
  • Tax number of a seller (it can be SSN, EIN, or ITIN, ATIN number);
  • Value of transactions.

 

The value of transactions includes payments for goods and services. The exception is payments from family members and friends. Transactions in the report are shown in full without deduction of marketplace fees.

What is the 1099-K form – it is an information report that marketplaces and card processors need to submit to the federal US tax office – and IRS every year. This form is for information purposes only and includes information about marketplace sellers and their payouts. 

 

Filing deadlines

  • January 31 – marketplaces need to send Form 1099-K to every reportable seller;
  • February 28 – IRS filing deadline for paper form 1099-K;
  • last day of March – IRS filing deadline for electronic form 1099-K.

 

Electronic filing is obligatory for companies filing more than 10 returns a year. With Lovat software marketplace can fill 1099-K information report in minutes.