Do suppliers get a 1099? Generally, no when you’re buying physical goods, and yes when you’re paying for services once the total hits $600 for the year. The wrinkle is that many suppliers sell both, and several other factors — the supplier’s legal structure, how you paid, and whether they’re a U.S. person — can flip the answer either way.
The Goods Versus Services Line
Two conditions trigger a 1099: the payment is made in the course of your trade or business, and total payments to that recipient reach the reporting threshold for the year. For most payment types that threshold is $600. Royalties are the outlier at $10.1Internal Revenue Service. Am I Required to File a Form 1099 or Other Information Return?
Payments for services go on Form 1099-NEC. That covers fees, commissions, and any other compensation paid to someone who is not your employee.2Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC A freelance designer, an outside consultant, a repair technician — all reportable once yearly payments cross $600.
Payments for physical merchandise, inventory, raw materials, and equipment are not reportable. Federal regulations specifically exempt payments for merchandise, freight, storage, telephone, and telegrams from the information return requirement.3eCFR. 26 CFR 1.6041-3 – Payments for Which No Return of Information Is Required Buy $50,000 in parts from a supplier and they get no 1099 for that sale, no matter how they’re organized.
A separate group of payments belongs on Form 1099-MISC rather than the NEC: rent, prizes and awards, medical and health care payments, and gross proceeds paid to attorneys. Each carries the $600 threshold, with royalties again at $10.4Internal Revenue Service. About Form 1099-MISC, Miscellaneous Information
When One Invoice Covers Both Parts and Labor
Supplier bills often bundle materials with the work. The IRS treats payments for services “including parts and materials” as reportable nonemployee compensation on the 1099-NEC.2Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC A technician who charges $2,000 in labor and $300 in replacement parts gets a 1099 for the full $2,300. The parts were incidental to the service.
Flip the ratio and the answer flips too. A $10,000 machine that ships with $200 in delivery and setup is fundamentally a purchase of goods. The freight portion is exempt on its own, and the setup is secondary to the product. Treat the whole payment as goods. When it’s genuinely unclear, ask which piece the supplier would still bill for if the other vanished. That’s the dominant element.
The Supplier’s Entity Type
Even for pure service payments, the supplier’s legal structure can eliminate the obligation. Payments to C corporations and S corporations are generally exempt from 1099 reporting.2Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC If your consulting firm is incorporated, no 1099 is typically required regardless of how much you paid them.
Two categories break the corporate exemption. Payments for legal services and payments for medical or health care services get a 1099 even when the recipient is a corporation.5Internal Revenue Service. Information Returns (Forms 1099) A law firm structured as a professional corporation still receives a 1099 for legal fees. Same with an incorporated medical practice.
LLCs Are Where Mistakes Happen
Limited liability companies cause more reporting errors than any other entity type because their tax treatment varies. A single-member LLC that has not elected corporate status is a disregarded entity for federal tax purposes and is taxed like a sole proprietorship.6Internal Revenue Service. Single Member Limited Liability Companies Service payments to that LLC are reportable. A multi-member LLC defaults to partnership treatment, also reportable. Only LLCs that have elected C-corp or S-corp status on Form 8832 fall under the corporate exemption.
You cannot tell an LLC’s tax classification from its name. That is exactly why the W-9 matters.
Payments Made by Card or App
If you pay a supplier by credit card, debit card, or through a payment app like PayPal or Venmo, the third-party settlement organization handles the reporting. The TPSO issues Form 1099-K to the supplier, and your 1099-NEC or 1099-MISC obligation for that transaction goes away.7Internal Revenue Service. Understanding Your Form 1099-K The 1099-K threshold for payment apps and online marketplaces is $20,000 in gross payments across more than 200 transactions. Credit and debit card processors report with no minimum.
The practical takeaway: run reportable service payments through cards or platforms and you take yourself out of the filing chain for those amounts. Cash, check, and ACH payments keep the obligation on you.
Foreign Suppliers Follow a Different Track
The 1099 series applies only to U.S. persons. When you pay a foreign individual or entity for services, you collect Form W-8BEN (individuals) or W-8BEN-E (entities) rather than a W-9.8Internal Revenue Service. About Form W-8 BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals) Payments to foreign persons go on Form 1042-S, due to both the recipient and the IRS by March 15 of the following year.9Internal Revenue Service. Instructions for Form 1042-S
The default withholding rate on U.S.-source income paid to foreign persons is 30%, though tax treaties can reduce or eliminate it.10Internal Revenue Service. Withholding on Specific Income The goods exemption still applies. Buying physical merchandise from a foreign manufacturer triggers neither withholding nor 1042-S reporting.
Get the W-9 Before You Pay
You cannot answer any of the questions above without the supplier’s tax classification, legal name, and taxpayer identification number. Form W-9 collects all three.11Internal Revenue Service. About Form W-9, Request for Taxpayer Identification Number and Certification Request it before the first payment goes out. Most compliance breakdowns start with businesses chasing suppliers for W-9s in January while filing deadlines close in.
The W-9’s “Federal Tax Classification” line is the gatekeeper. It tells you whether the supplier is a sole proprietor, partnership, C-corp, S-corp, or LLC, and for an LLC which tax election has been made. That single answer decides whether a service payment gets reported.
When a Supplier Won’t Provide a W-9
If a supplier refuses to give you a W-9, or provides a TIN that doesn’t match IRS records, you must begin backup withholding at a flat 24% on future reportable payments.12Internal Revenue Service. Backup Withholding Withheld amounts get deposited with the IRS and reported annually on Form 945.13Internal Revenue Service. 2025 Instructions for Form 945 Backup withholding is not optional. If you fail to withhold when required, your business becomes liable for the tax.
Filing Deadlines
Form 1099-NEC has the tightest schedule. Both the recipient copy and the IRS copy are due by January 31 of the year following payment.14Internal Revenue Service. Information Return Reporting – Section: Form 1099-NEC, Nonemployee Compensation There is no automatic extension for the NEC.
Form 1099-MISC splits its dates. Recipient copies are due January 31, but the IRS deadline is February 28 for paper filers or March 31 for electronic filers.2Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC Any business filing 10 or more information returns in a calendar year must file electronically, counting all information return types combined.15Internal Revenue Service. E-File Information Returns
Penalties for Missing or Wrong Filings
The IRS charges separate penalties for failing to file a correct information return on time and for failing to furnish a correct payee statement. For returns due in 2026, the per-form penalty tiers run:16Internal Revenue Service. Information Return Penalties
- Filed up to 30 days late: $60 per return
- Filed 31 days late through August 1: $130 per return
- Filed after August 1 or not filed at all: $340 per return
- Intentional disregard: $680 per return with no maximum cap
Penalties apply per form. Miss the deadline on 50 returns and you face 50 separate charges. Small businesses get lower annual caps, but the intentional disregard tier has no ceiling. The most common penalty is also the most preventable: mismatched names and TINs between the 1099 you filed and IRS records, which traces straight back to whether you collected an accurate W-9 before you paid.