Tax Implications of Running an Affiliate Program: What You Need to Know

When you receive money from an affiliated company, you are subject to tax. As a company that pays affiliate fees, you are considered the withholding agent and are responsible for obtaining the appropriate withholding tax form from each affiliate. If you don't receive the appropriate form and pay fees to a foreign subsidiary, you must withhold a portion of the income for taxes and send it to the federal government. When you have an affiliate that lives outside the United States, you are not a U.

S. citizen and if you receive compensation for affiliate marketing services provided to you or with the expectation of receiving them, you must obtain the foreign equivalent of a W-9, called W-8BEN, from the affiliate. Form W-8BEN states that a foreign subsidiary is not a U. company.

You must withhold 30 percent of the member's income for taxes if they don't receive the W-8BEN form. Many countries have tax treaties with the United States that provide for an exemption from certain types of income or a withholding rate lower than the predetermined 30 percent foreign tax. If a foreign subsidiary lives in a country with a tax treaty, you must specify the details of the treaty agreement on form W-8BEN and you must retain the amount designated by the treaty. Foreign branches must have a social security number or obtain a tax identification number from the Internal Revenue Service to claim tax treaty benefits. If a foreign subsidiary can claim U.

residency for income tax purposes because they spent a certain amount of time in the U. S., they are not considered a foreign affiliate for U. tax purposes and are not subject to a 30 percent withholding. Obtain Form W-9 from non-resident citizens instead of Form W-8BEN.

For income tax purposes, if a foreign subsidiary lives outside the United States but is an American citizen, they are not subject to a 30 percent withholding and must file Form W-9 with you instead of Form W-8BEN. Although, as a matter of policy, you can request a new W-8BEN form every year from your foreign affiliates, the choices that a foreign subsidiary makes on the form are valid for three years from the date of the form. In some circumstances, the choices listed on Form W-8BEN remain in effect indefinitely until the foreign subsidiary notifies you of a change in circumstances. Foreign affiliates are required to notify you of any change in circumstances, such as moving to another country or changing their U.

taxpayer status, within 30 days after the change.

Taxes and Affiliate Marketing: What You Need to Know

Your affiliates earn income from your business, which creates some obligations for you as a taxpayer. While we'll use Amazon's variety of international affiliate programs as a general filter to determine which countries to focus on, this information applies directly to earning commissions from other international affiliate programs based in those same countries. If you're not careful, your phenomenal affiliate marketing campaign could turn into your terrifying encounter with the IRS. While registering for the Travelpayouts affiliate program is instant, some other platforms select affiliates manually and may take longer to be approved. Keeping accurate records is necessary for the proper functioning of your affiliate marketing business, but it also makes it much easier to classify your taxes.

You don't have to apply for affiliate marketing taxes in your own country, you just have to submit a quarterly MOSS report on VAT that details all the sales you make in different countries of the EU.

Advertisers and Affiliate Sellers

Advertisers, also known as merchants or sellers, are companies that use affiliate marketing to promote their products. Remember that expenses are only those costs directly related to affiliate marketing activities, such as web hosting, software subscription, and utility bills. If you are an affiliate seller in the U. S., you're not required to pay sales tax because you're not actually selling anything; you're just referring customers to the seller.

Finding an Accountant Who Knows About Affiliate Marketing

Finding an accountant or accountant who already knows the ins and outs of affiliate marketing isn't easy, although it's getting easier. But even if you've already started your business, it makes sense to educate yourself about affiliate marketing and the law to make informed decisions. In this post, we'll dive deeper into the world of affiliate marketing taxes and see how they apply in different countries including the U. S., United Kingdom and other countries with tax treaties with America.

Affiliate marketing can be very lucrative whether it's a side hustle or full-time career; however it's important to understand how taxes work in order to stay compliant with local laws and regulations.

Dwight Embery
Dwight Embery

Subtly charming music enthusiast. Falls down a lot. Typical bacon fanatic. Hardcore food junkie. Avid music junkie.

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