Small business tax help website

Direct Seller Tax Information

Below is direct seller tax information for anyone in the direct sale business. Many US taxpayers are direct sellers owing a home business or small business. All taxable earnings that a direct seller receives Some must be reported and the IRS has rules on what direct sale earnings are taxable earnings for direct seller.

How to report direct sale earnings or income?

For taxable direct sale income, the direct seller must report them on Schedule C of the form 1040 or Schedule C-EZ of the form 1040.

Direct sellers must report all income as direct sellers including:

  • income from sales (payments received from customers for products they buy from you in a direct sale business)
  • commissions
  • bonuses
  • percentages the direct seller receives from sales and sales of his or her downline
  • prizes, awards, gifts received related to business
I did not have a W-2 or 1099, do I still have to report all direct selling income?

The IRS requires that all income from direct sale business be reported whether there is an informational return or not.

Am I a direct seller for tax purposes?

For tax purposes, the IRS defines a direct seller as someone meeting all of the following conditions.

  1. you are in one of the following trades or businesses
    • selling or soliciting the sale of consumer products either in a home or other place that is not a permanent retail store
    • delivering or distributing newspapers or shopping news
  2. your pay (cash or otherwise) is largely directly related to sales or other output rather than to the number of hours worked
  3. your services are performed under a written contract between you and the direct sale company or person and that the contract states that you will not be treated as an employee for federal tax purposes