throwaway5678i

Yup, and these merchants are keenly aware of that unfortunately. When the news broke of the change, suddenly they all became very concerned about taxes and reporting. We've actually done a good bit of work on our end to clear up what 1099-K's are and what taxes actually mean for their businesses, so the material is clear and accessible to all of them.

The problem is that doesn't overcome the fear they have for the IRS, unfortunately.

Essentially, we want to monetize transactions with a % fee through a payment handling offering for the merchant on top of our (free) platform. We give them tools to run their business but charging them appropriately for it is difficult since their margins can be thin. We figured that offloading the cost of the platform to their customers would be easier than convincing them to purchase a SaaS subscription.

However, these merchants are reluctant to use this sort of service because if they used it, our platform legally has to report this in a 1099-K to the IRS. Same as any marketplace these days.

As for the referral suggestion, we actually worked with tax professionals in order to do just that. We figured if we personally vetted some tax pros for referrals vs a link to something like H&R Block, it'd help make the difference. It didn't.

(Also, we use Stripe Tax to handle sales tax for the customers who do use the monetized features. They love it!)

It's a mix of both, but the "hobbyist" portion is a quite bit larger. From what we gathered from our data and speaking to some customers directly, we have the belief that their profit margins are thin enough to the point where they will either pay nothing or nearly nothing in taxes anyway... but the idea of simply being on record is terrifying to them.

Both groups generally have issues with taxes, they usually take payments using Venmo, Paypal Friends and Family, or even direct bank transfer just to get around the reporting. They pretty much use and abuse any form of electronic payment that they can get away with without presenting themselves as a business.

As for monetization, we keep track of the "non-monetized" transactions and it's in the low 7 figures. It's not a crazy amount of money, but it's nothing to sneeze at either.