Tax Forms
Learn about required tax forms when using Lemon Squeezy to sell your products.
Disclaimer
The following information is not legal or tax advice. Consult with your tax advisor for personalized guidance.
As Lemon Squeezy is a US-based company, we are required to collect certain information so that we can generate tax forms for our merchants. This process is to help merchants report their earnings properly and to make sure that the appropriate taxes are applied. The type of form you need to fill out depends on your location and status:
- US persons are required to fill out a W-9 form
- Non-US individuals will need to fill out a W-8BEN form
- Non-US organizations will need to fill out a W-8BEN-E form
Payouts may be disabled until you have completed the relevant tax form. Links to the relevant tax forms can be found in the Payout Settings section of your store.
W-9 form
US merchants and affiliates are required to complete a standard IRS form called the Form W-9 which includes some basic information about you, including a Tax Identification Number (TIN). The TIN can either be your Social Security Number (SSN) or the Employer Identification Number (EIN) of your business.
Each store in Lemon Squeezy has one owner, and it is their details which should be in the Form W-9. That owner can be a corporation or other type of entity, but not a partnership. Partners must nominate one partner to submit a Form W-9.
See our guide on completing a W-9 form for more information.
W-8 forms
Non-US merchants and affiliates are required to complete a standard IRS form called Form W-8BEN (for individuals) or Form W-8BEN-E (for organizations) which includes some basic information about you, including your Foreign Tax Identification Number (TIN) and country of residence.
The purpose of the Form W-8BEN and Form W-8BEN-E is to establish your identity and status as a non-U.S. person. If you do not submit your tax information, your earnings from US buyers will be taxed at the highest rate of 30%, and will not benefit from a reduced withholding tax rate under a double tax agreement (if applicable).
Each store in Lemon Squeezy has one owner, and it is their details which should be in the tax information. That owner can be a corporation or other type of entity, but not a partnership. Partners must nominate one partner to submit their tax information. Withdrawals will only be made to the nominated partner.
See our guide on completing a W-8 form for more information.
Tax witholding
Generally, transactions in digital creative content give rise to royalty earnings. If you are a non-US merchant, your sales to US buyers may be subject to royalty withholding tax, depending on your country’s income tax treaty with the US.
US tax law provides that the US government may collect taxes for US source royalty income. A royalty is considered to be US sourced when the sale is made to a person residing within the US. Accordingly, if you are a non-U.S. person, your sales to US buyers may be subject to royalty withholding tax of up to 30%.
However, if you are a resident of a country that has an income tax treaty with the U.S., you may be eligible for a reduced withholding tax rate. The full text of these treaties can be found on the IRS website.
Frequently asked questions
Will I receive a 1099-K?
If you meet all the criteria below for the previous calendar year, you will receive a 1099-K from Lemon Squeezy:
- The account is based in the US
- More than $20,000 USD in gross volume from sales of goods or services in the previous calendar year
- More than 200 transactions in the previous calendar year
A copy will be sent electronically.
The 1099-K is an informational form summarizing sales activity, aiding in tax reporting.
If you don’t meet the above criteria, you won’t receive a 1099-K.
Will I receive a 1099-MISC?
The 1099-MISC is applicable only for affiliates. Affiliates with commissions exceeding $600 USD in the previous financial year will receive a Form 1099-MISC.
PayPal will send out their own 1099-MISC forms for anyone with sales in excess of $600 USD.
You will receive either a 1099-MISC or 1099-K based on whether you sell your own products or earn affiliate commissions, and the revenue amount.
When can I expect the form?
Filing of 1099s starts in January each year for the previous year’s earnings. Expect the form to reach you between January-end and March, as Stripe submits it electronically to the IRS and sends you both an email and physical mail.
Paused payouts and blocked payments
Payouts may be blocked or paused if we are missing required tax information. Funds cannot be transferred externally, but payments will continue to be received. Please fill out the missing required tax information or outstanding account requirements. Successful submission of W-8/W-9 may lead to unpaused payouts or unblocked payments within two business days.
Why are the W-8 and W-9 tax forms being requested?
W-8 and W-9’s need to be collected to confirm your tax residency for 1099 reporting.
I am not a US citizen or US resident — why do I need to complete this form?
The W-8 series of forms are used by foreign individuals and entities to certify their foreign status for U.S. tax withholding purposes. The forms help the U.S. payers, such as businesses or financial institutions, determine whether they need to withhold taxes on payments made to foreign persons.
The W-8BEN form, for example, is often used by individuals to declare that they are not a U.S. person and are not subject to U.S. taxation. It’s important for non-U.S. persons to complete the appropriate W-8 form to ensure that the correct amount of tax is withheld.
On the other hand, if you are a U.S. person or a business with a U.S. legal entity, you would typically fill out a W-9 form to provide your taxpayer identification number (TIN) to the payer, and this form certifies that you are a U.S. taxpayer.
There are discrepancies in 1099 amounts
The 1099-K provides a rough approximation, as it includes transactional volume, fees, VAT, affiliate commissions, etc. It does not align precisely with your payouts. Use it as a reference, not an absolute figure.
Reporting corrections
If you notice mistakes in your 1099, such as incorrect payee information or significant discrepancies in reported earnings, please contact our support team. We’ll collaborate with our payment processor to address and rectify any issues promptly.
It’s always advisable to consult with a tax professional or legal advisor to ensure you are completing the correct form and providing accurate information based on your individual circumstances.