How to pay a small-biz collaborator

Post date: 2021-06-11 15:05:45

Two artists doing a collaboration. Help me figure out taxes!

I run a small art business. A colleague of mine (we know each other through Instagram but have never met in person), let's call her Annie, also runs a small art business. We just completed a collaboration, in which she created jewelry pieces based off my artwork.

Her guidelines are that we split profits 50/50. She creates samples of the pieces, I put up pre-order listings in my online shop (via Shopify), we both promote online, I photograph the items and list them, I take pre-orders, she creates the pieces within about 4 weeks, ships them all to me, then I package and fulfill orders. We had a similar collection last year (items were sold though my then-Etsy shop) where I ended up paying taxes on that Etsy income, because I didn't account for sending her her half of sales.

Here we are now, and I'n ready to send Annie her half of the sales ASAP (about $3.5K). I told her I'd find out if I needed to eventually send her a form 1099, and she replied and asked if I could take taxes out now, and that she's always considered this kind of thing to be a large wholesale order.

I'm feeling silly for not figuring this out with her earlier. Can anyone advise on what the best move here is? I want to do my taxes correctly and I thought a 1099 was the correct form for her but now I'm confused. Thanks for any help!

Please click Here to read the full story.