How E-Commerce Brands in the U.S. Should Prepare for Tax Season (Including Affiliate Tax Documents)

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Tax season is like that one relative who shows up uninvited—every year, right on time, and somehow still manages to catch you off guard.

If you’re running an e-commerce brand and working with affiliates, tax season can feel like a logistical nightmare. You’re juggling sales tax, income tax, and—oh yeah—tracking down every affiliate you’ve paid so you can send them the right tax forms.

Let’s break down what you need to do to make sure your business doesn’t get slapped with penalties or, worse, an audit.

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Why Tax Season Hits E-Commerce Brands Harder

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1. You Have a Ton of Moving Parts

Running an e-commerce brand means dealing with revenue from multiple platforms, processing payments from different gateways, and managing a laundry list of expenses. Add affiliates into the mix, and now you’ve got commission payouts to account for as well.

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2. Sales Tax Is a Pain

Ever since the Wayfair v. South Dakota ruling, states have been cracking down on e-commerce businesses that sell across state lines. You could owe sales tax in states where you don’t even set foot. Tracking that is no small feat.

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3. Affiliates Complicate Everything

Paying affiliates might boost your revenue, but it also means you’re responsible for issuing tax documents—specifically 1099-NEC forms. If you mess this up, the IRS won’t hesitate to knock on your door.

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Affiliate Tax Documents You Need to Know About

Here’s the deal: If you paid an affiliate $600 or more during the year, you need to issue them a 1099-NEC. This form reports their income to the IRS, and you better believe the IRS cares.

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What You Need from Affiliates

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What You Need to Send to Affiliates

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What Happens if You Don’t Issue 1099s?

Penalties for failing to file 1099s can range from $50 to $580 per form, depending on how late you are. Plus, if the IRS thinks you intentionally ignored the requirement, the penalty can skyrocket.

So, yeah—get those forms out on time.

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What About Your Own Tax Liability?

Running an e-commerce brand means dealing with:

Income Tax: You’ll need to report your revenue and deduct expenses.

Sales Tax: Make sure you’re collecting and remitting the correct amounts.

Payroll Tax: If you have employees (or even contractors), keep up with payroll obligations.

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Top Deductions to Look Out For

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How to Stay Ahead of the Tax Game

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1. Automate Your Tracking

Use software like QuickBooks, Xero, or even a specialized app to track income, expenses, and payouts. Automating this makes tax season way less chaotic.

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2. Collect W-9s Before You Pay Anyone

Don’t wait until tax season to start gathering W-9s. Make it part of your affiliate onboarding process so you’re not scrambling later.

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3. Set Aside Cash for Tax Payments

Don’t make the mistake of reinvesting every dollar back into the business. Set aside a portion of your revenue—typically 25-30%—for taxes.

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4. Work with a Pro

An accountant who understands e-commerce can help you sort through deductions, manage sales tax obligations, and file your returns correctly. Trust me—this is not where you want to cut corners.

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Final Thoughts

Tax season doesn’t have to be a disaster. By organizing your documents, automating your tracking, and staying on top of affiliate payments, you can make it through with minimal stress.

Don’t let tax season catch you off guard—start preparing now, and you’ll thank yourself later.

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