When selling products from your Fourthwall online store, one of the things you need to keep track of is taxes. And filing them is relatively easy regardless of what goods you sell and the location of the customer.
Of course, this is more prevalent for my visitors in the United States. Any sellers outside of the US will have to adhere to regional tax laws.
Today, let’s take a look at how Fourthwall handles taxes and what you’re responsible for filing in the US.
What “Merchant of Record” Means
The term, Merchant of Record, means that the organization is technically the merchant and is responsible for any sales tax accumulated through selling of goods and/or services on their platform. They also directly handle refunds, regulatory compliance, and various connected liabilities thereof.
In this case, Fourthwall is the Merchant of Record. Although you build an online shop to sell products and offer membership services, Fourthwall is still technically the merchant. In laymen’s terms, you are but a mere vendor using the Fourthwall storefront to sell goods.
What this means is that you don’t have to worry about sales tax or anything related, as you are not the business license holder. You’re an affiliate who is using the merchant to sell to your consumers.
Although you’re not responsible for taxes accumulated from sales on Fourthwall, you do have a responsibility to pay your share.
What Monies Are Included from Fourthwall for Taxes?
Basically, you’re on the hook for “profits” made for the taxable year. For instance, if you made a $2.20 profit on something you sold for $18.99, it’s the $2.20 of which you’re liable.
Fourthwall pays the sales tax on the $18.99 as a whole.
In a nutshell, any “profits” you made from product sales or memberships are what will be added to the 1099-MISC from Fourthwall. This is after paying any fees that you’re handing over to Fourthwall, such as the 3% fee on digital products and the 5% fee on memberships.
Now, all of this has to happen in the prior year. Taxes you file in 2025 are based on the income you made in 2024, and so on. Anything you make in 2025 will be used for taxes in 2026.
1099-MISC in Stripe
For individuals in the US, when you hit the $600 threshold during the calendar year for sales, Fourthwall will send you a 1099-MISC to your Stripe Connect dashboard. From here, you are able to view and print the form as needed to file your taxes.
Entities such as corporations, LLCs, partnerships, or international creators will have to report taxes themselves. These instances will not receive a 1099-MISC.
Keep in mind that the $600 threshold is the minimum requirement for Fourthwall to send a 1099-MISC. You will still have to report the income on your taxes, even if you only made $50.
This minimum requirement for business entities is being phased over the next few years, according to experts, but if you didn’t receive a 1099-MISC from Fourthwall and you did not make over $600, that is why. They are currently not required to submit the form for monies less than $600.
Do You Have to File Taxes On Less than $600?
Even if you do not receive a 1099-MISC from any business entity, you must file the income on your taxes. The difference is that you don’t have a form to submit…only the income.
A lot of people will take advantage of this and not file if they do not receive the form. However, I must point out that it is still your responsibility to record all taxable income to the IRS.
Now, will Uncle Sam come kicking down your door if you didn’t record that $25 payment from selling a few shirts on Fourthwall? Probably not. But they can levy all kinds of fees as well as liens against assets such as cars and houses if they decide to be vicious about it.
Remember, taxes are a legal obligation and the IRS can get quite anal about making sure that every dollar is accounted for.
At the end of the day, filing taxes is your responsibility, whether you get a 1099 from Fourthwall or not.
Be Mindful of Possible Tax Write-Offs
Some things can be written off for your taxes that are related to managing your Fourthwall store. These are expenses that you pay for that are necessary for your “business.”
For instance, paying an artist for something you put on a T-Shirt to sell can be considered a tax write-off as it is necessary to the development of that product. In this case, the money you spent on that designer is no longer “taxable income” on your 1040 form.
It’s important to understand the difference between ordinary and necessary expenses. Unfortunately, a lot of people seem to think they can just write off meals, hotel stays, and other expenses that have no bearing on generating income or as defined as necessary by the IRS.
Essentially, necessary expenses are those that must be made in order to keep your business afloat. These are fees that cannot be avoided to continue generating revenue.
For a full list of what you can claim as a tax write-off, you’ll have to speak to your accountant. Some things are viable as write-offs, while others are not. Sit down with your tax consultant and bring your receipts. You may be off the hook for a lot more than you might realize.
Keep a Savings Account for Paying Taxes
One of the best ways to keep yourself out of hot water with the IRS and state revenue agencies is to make sure you have the money to pay at the end of each year.
Working from home as a freelancer or entrepreneur often means you don’t pay immediate taxes on income. That means you’ll have to pay those taxes when filing before April 15th. Depending on how much you made throughout the year, that amount can be staggering.
A good rule of thumb is to save at least 10% of your income in a savings account throughout the entire year. That way, when tax season rolls around, you’ll have money in the bank that may help soften the blow. Plus, it’ll earn a bit of interest.
This is just one of the many things you have to consider when working for yourself.
Taxes Are But a Fun Stage of Entrepreneurship
So many people nowadays jump on the entrepreneurship bandwagon in the hopes of making a lucrative career. It’s not entirely a bad thing, but you need to keep things like taxes, retirement, insurance, and other adulting expenses in mind when doing so.
Luckily, Fourthwall files sales taxes for you unless you’re operating as a business or live outside of the United States. Coming from someone who has owned a couple of businesses in the past, it eases one hell of a headache.
Just remember to file all of your income on your taxes. It may not make a dent in what you owe or what you get as a return, but at least the IRS can’t run you down with fees if they discover you didn’t add a few sales made last year.
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