Is a software subscription 1099 reportable if the company is a partnership?


Partnership payments are not exempt from reporting, if the payment is reportable. Determining whether your software subscription is subject to 1099 reporting depends on the specific circumstances. If you are paying $600 or more to license software to be installed on your organization's computers, those payments might or might not be reportable, depending on the specific nature of the transaction.

A subscription implies that there is a time factor involved in the use of the software, and that at the end of a designated period of time, you must pay again or lose use of the software. If that describes your situation, then you are leasing the software. Report the payment in box 1, Rents.

If the software is “packaged” (whether bought off the shelf or downloaded from the web), and once you buy it, it’s yours to use in perpetuity, then it is considered merchandise and you do not report the payment.

(If the partnership programmed the software solely for your organization, and when done, it is installed on your computers and you own it, that would be considered a service, just as if it had developed a website for you; the payment would be reportable under 1099-MISC box 7. And finally, if you receive a copyright right to alter and distribute the program to others, it would be a royalty payment, box 2.)

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