Do You Have to Issue a 1099 for Purchase of Goods?

You generally do not have to issue a 1099 for the purchase of goods. The IRS instructions for Forms 1099-MISC and 1099-NEC list “payments for merchandise, telegrams, telephone, freight, storage, and similar items” as exceptions to information reporting, so buying inventory, raw materials, equipment, or office supplies from a vendor does not trigger a filing, no matter the dollar amount.¹ One narrow direct-sales rule and any service component bundled onto the same invoice can still bring a 1099 into play, so it pays to know where the line sits.

Why Goods Are Off the 1099 List

The 1099 system is built to track income that might otherwise go unreported: fees to freelancers, independent contractors, landlords, royalty recipients, and similar payees. A vendor selling you a product already books the sale as revenue in its own accounting, so the IRS does not ask the buyer to flag it separately. That is why a $20 box of printer paper and a $50,000 order of structural steel sit on the same side of the line. Both are merchandise, and neither is reportable.

The exclusion covers straightforward product purchases you make from any vendor: bulk supplies, retail inventory, off-the-shelf equipment, freight, storage, and utilities like telephone service. Payment method does not change the answer either. If you pay by credit card, debit card, or a third-party platform like PayPal, the processor handles any reporting through Form 1099-K, and you do not issue a 1099 yourself.²

When an Invoice Mixes Goods and Services

Most of the real confusion shows up on invoices that contain both a product and labor. The IRS cares about the service portion. You break the invoice apart when the service piece is meaningful and treat each part on its own terms.

Take an HVAC installation. The invoice reads $8,000 for the unit and $3,000 for installation labor. The $8,000 for the equipment is not reportable. The $3,000 in labor is service income to the contractor and would be reportable on Form 1099-NEC if it meets the threshold and the contractor is not a corporation.

The math shifts when a contractor supplies parts as part of doing the job. If you pay a plumber $2,500 to fix your office pipes and the plumber buys $400 in parts out of pocket, you report the full $2,500. The plumber deducts the $400 as a business expense on their own return; you report what you paid for the service. The IRS instructions confirm that when supplying parts or materials is incidental to providing a service, the entire payment counts as reportable nonemployee compensation.¹

So the practical test on a mixed invoice is which side the payment is really for. A product with installation billed separately splits. A service that happens to include some supplies stays whole.

The One Time Goods Do Require a 1099

A single narrow rule reaches goods transactions. If you sell $5,000 or more in consumer products to a buyer for resale on a buy-sell, deposit-commission, or other commission basis, and the buyer resells outside a permanent retail establishment, you report that sale on Form 1099-MISC (Box 7) or Form 1099-NEC (Box 2).¹ You check the applicable box; you do not enter a dollar amount.

This targets direct-sales arrangements where a company sells products to independent distributors who then resell door-to-door or at events. If you are buying goods for your own business use, or buying inventory to resell through a normal retail store, this rule does not apply to you.

Software, Subscriptions, and Digital Products

Off-the-shelf software, a SaaS subscription, or a digital download is a product purchase. Buying 50 Microsoft Office licenses or paying an annual subscription for project management software is not reportable, and no 1099 is needed.

The analysis flips when you are paying someone to build something for you. Hiring a developer to write proprietary software, design a custom website, or build a bespoke app is paying for services. The deliverable is the product of that person’s labor rather than something pulled off a shelf, and those payments are reportable nonemployee compensation if the other requirements are met.

What Turns the Service Portion Into a 1099

Once you have carved off the service piece of a payment, a few conditions determine whether it actually needs a 1099.

The 2026 Threshold

For payments made after December 31, 2025, the general information-reporting threshold under Section 6041 rose from $600 to $2,000 per payee per year.³ The threshold applies to the total of all reportable payments to one payee across the calendar year, not to each invoice. Five $400 payments to the same consultant reach $2,000 and hit the threshold. Because goods purchases are excluded outright, no amount of merchandise spending pushes you over the line.

Sales tax that is imposed on the service provider and paid to them counts toward the reportable amount. Sales tax imposed on you as the buyer and merely collected by the provider does not.¹ Travel reimbursements to a contractor also count if the contractor did not account for the expenses to you.

Who You Paid

Even a clearly reportable service payment can drop out based on the recipient’s structure. Payments to C-corporations and S-corporations, including LLCs taxed as either, are generally exempt from 1099-MISC and 1099-NEC reporting.¹ You determine this from the entity-type box on the vendor’s Form W-9.⁴ Payments to tax-exempt organizations and to U.S., state, territorial, and foreign governments are also exempt.

The corporate exemption has carve-outs. Attorney fees for legal services go on Form 1099-NEC Box 1 even when the law firm is a corporation, and gross proceeds paid to an attorney, such as settlement funds, go on Form 1099-MISC Box 10.¹ Medical and health care payments to corporations, including professional corporations, are reportable on Form 1099-MISC Box 6.

How You Paid

Payments run through a credit card, debit card, or third-party settlement platform are handled by the processor on Form 1099-K, so the payer does not issue a 1099-NEC or 1099-MISC on the same transaction.² Direct payments, checks, and ACH transfers to the vendor still fall on you to report if the other conditions are met.

Get a W-9 Before You Pay

The W-9 tells you the vendor’s legal name, taxpayer identification number, and entity type, which is what lets you apply the corporate exemption in the first place. Collect one from every new vendor before issuing the first payment rather than chasing them down at year-end. If a vendor will not provide a W-9 or gives an incorrect taxpayer identification number, you are required to withhold 24% of the payment as backup withholding and remit it to the IRS.⁵ The IRS offers a free TIN Matching service to verify a name-and-TIN combination before filing.⁶

If You Already Filed a 1099 for a Goods Purchase

Issuing a 1099 for a purchase that did not require one is fixable, and you should fix it. For paper-filed returns, prepare a new copy of the form with the “CORRECTED” box checked at the top, zero out the dollar amounts that should not have been reported, include a new Form 1096 transmittal, and mail everything to the IRS Submission Processing Center. Send an updated copy to the recipient. Do not include a copy of the original incorrect return.⁷

For electronically filed returns, corrections go through the same system you used to file, either FIRE or the IRIS portal. File the correction as soon as you find the error. A correction filed before August 1 can help qualify for the de minimis exception, which waives the penalty on a limited number of corrected returns when the originals were timely filed.⁷

1
Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC (Rev. April 2025)
2
Internal Revenue Service. Understanding Your Form 1099-K
3
Office of the Law Revision Counsel. 26 U.S. Code 6041 – Information at Source
4
Internal Revenue Service. Instructions for the Requester of Form W-9 (Rev. March 2024)
5
Internal Revenue Service. Topic No. 307, Backup Withholding
6
Internal Revenue Service. Taxpayer Identification Number (TIN) Matching
7
Internal Revenue Service. 2025 General Instructions for Certain Information Returns