Are computer licenses subject to 1099-MISC reporting? If so, in which box does that go?


Determining whether your computer licenses are subject to 1099 reporting depends on what you are licensing and the specific circumstances, according to Miss Tennett (#10013007512) at the IRS information reporting service center. For example, are you licensing computers or software? Is the company you're licensing from a corporation or not? (U.S. corporations are exempt from reporting.)

If the vendor is not a corporation, then whether payment for software is reportable depends on the particulars of what you bought—the payment could be for merchandise, services or royalty (and sourcing rules vary, though if you bought the license for software in the U.S., it’s not an issue).  

If you bought packaged or off-the-shelf software, then it is considered merchandise and is not reportable. If you bought custom software developed for your company, then the IRS considers that payment for services and it is reportable. Or it could be a royalty (box 2) if there is resale involved.

If those fees are for licensing the hardware you could buy off of any shelf in a store, that would be considered merchandise and would not be reportable. If you're licensing just the internet connection, that would be qualified as a utility and would not be reportable.

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