Sales tax, 1099s, gifted products and cross-border income

Income tax is not the only tax a creator business deals with. Creators who sell merchandise or some digital products must deal with state sales taxes, which differ from state to state. Brands, platforms and payment apps report payments on Forms 1099, and creators who pay freelancers must issue them too. Free products and trips received for content raise their own tax questions, and income from foreign brands and platforms can bring withholding and reporting requirements. CRE-302 introduced economic nexus and marketplace facilitator laws; this lesson explains how they work in practice, along with information reporting and cross-border issues.

How sales tax works

The US has no national sales tax. Forty-five states and the District of Columbia impose sales taxes, and thousands of local jurisdictions add their own rates; Alaska has no state sales tax but allows local ones, and Delaware, Montana, New Hampshire and Oregon have no general state sales tax. Sales tax is charged to the final buyer on taxable sales, collected by the seller and remitted to the state. Each state decides what is taxable. Tangible goods, such as merchandise, are usually taxable. Services, including creating sponsored content and advertising services, are generally not taxable in most states, although some states tax certain services. Digital products, such as downloadable presets, e-books and online courses, are taxable in some states and exempt in others.

Nexus: where you must collect

A seller must collect a state's sales tax if it has "nexus" with that state. Physical presence, such as living, working or storing inventory there, creates nexus. Since the Supreme Court's 2018 decision in South Dakota v. Wayfair, every state with a sales tax also applies economic nexus: remote sellers must collect once their sales into the state exceed a threshold, most commonly $100,000 in a year, while large states such as California, New York and Texas use $500,000. Several states have dropped a separate test based on 200 transactions, but some still use one. Your home state is almost always a nexus state if you sell taxable items there.

Marketplace facilitators and collecting tax

Most states have marketplace facilitator laws requiring large online marketplaces, such as Amazon, Etsy, eBay and TikTok Shop, to collect and remit sales tax on sales they facilitate. If you sell only through such marketplaces, the marketplace usually handles collection in those states, although you may still need to register in some states or count those sales toward thresholds. Print-on-demand services and merch partners may also collect tax on your behalf, depending on how the sale is structured. If you sell through your own store, you are responsible for collecting the correct rate, which often depends on the buyer's address, filing returns with each state where you are registered and remitting the tax. Sales tax software that calculates rates and prepares returns is worth its cost once you are registered in several states.

Forms 1099 you receive

Clients and platforms report payments to the IRS on information returns, and you receive copies. Form 1099-NEC reports nonemployee compensation, such as brand fees. Its threshold was $600 for decades; under the One Big Beautiful Bill Act it rises to $2,000 for payments made after December 31, 2025, with inflation indexing after 2026. Form 1099-K is issued by payment card companies, payment apps and online marketplaces; the law restored its threshold to more than $20,000 and more than 200 transactions in a year. Form 1099-MISC reports royalties of $10 or more and certain other payments. Platforms that pay ad revenue may issue a 1099-MISC or 1099-NEC. Whatever forms you receive, you must report all business income, including amounts below the thresholds, and reconcile the forms with your own records so that income is not reported twice.

Forms 1099 you must issue

If your business pays a freelancer, such as an editor or designer, $2,000 or more for services in 2026, you generally must file Form 1099-NEC and give them a copy by January 31 of the following year. Collect a Form W-9 before paying anyone, so you have their legal name and taxpayer identification number. If a payee will not provide a valid number, you may be required to apply backup withholding of 24 %. Payments to corporations are generally exempt, except for certain payments such as legal fees. Payments made through a card or payment app are reported by the processor on Form 1099-K, so you do not issue a 1099-NEC for them.

Gifted products, trips and barter

The IRS treats property or services received in exchange for services as income at fair market value. Influencers who receive free products, trips, event tickets or services in exchange for content must generally include their value in income, and the value is also subject to self-employment tax. Genuinely unsolicited items with no obligation are less clear, but if a brand expects coverage, treat them as income. Items you must return, or that are used only to make the content and handed back, are not income. Brands may report the value on Form 1099-NEC. Keep a log recording each item, the date, its fair market value and what you posted.

Cross-border income

US citizens and residents are taxed on worldwide income, so foreign income must be reported, converted to US dollars. Foreign clients and platforms may withhold tax at source in their own countries, and the foreign tax can usually be claimed as a foreign tax credit. If you perform services in Canada, such as appearing at an event, the payer is generally required under Regulation 105 to withhold 15 % of fees for services performed in Canada and remit it to the CRA, unless you obtain a waiver in advance based on the Canada–US tax treaty; you may then need to file a Canadian return to recover it. US persons with foreign financial accounts whose combined value exceeds $10,000 at any time during the year must file an FBAR (FinCEN Form 114), and larger holdings may require Form 8938.

Paying foreign freelancers can create obligations too. Payments to foreign persons for services performed entirely outside the US are generally not subject to US withholding, but you should collect Form W-8BEN to document their foreign status. Payments of US-source royalties to foreign persons are generally subject to 30 % withholding, often reduced by treaty. Seek advice before making such payments.

Keeping sales tax under control

Sales tax compliance becomes a recurring workload once you are registered in several states. Each state sets its own filing frequency, often monthly, quarterly or annually depending on the amount collected, and some require returns even when no tax is due. Missing a return can bring penalties even when the tax itself is small. Use software or a marketplace to calculate rates by address, set reminders for every filing date, keep copies of returns and exemption certificates, and review your nexus position at least once a year as sales grow. If you discover that you should have been collecting in a state for some time, a voluntary disclosure agreement can often limit back taxes and penalties.