Written for online stores in the US selling on their own site or on marketplaces: direct-to-consumer brands, private-label and FBA sellers, dropshippers and subscription sellers.
The short version
- Get advice before calling packers contractors.In California, packing is part of an online store's usual business, so calling packers contractors is high risk. Have counsel apply the full test.
- Collect the right tax form first.Get a W-9 before the first payment from US freelancers, even those abroad. Properly classified non-US individuals working wholly abroad usually give a W-8BEN.
- Have every freelancer assign copyright in writing.Get a signed written assignment of copyright in designs, photos and code from every freelancer and agency you use.
If your team includes packers, a virtual assistant abroad or a freelance designer or photographer, each needs a different setup. Getting it wrong shows up later as back wages, payroll tax or a missing form.
Packers and warehouse staff
Counsel can calculate wage, payroll-tax and penalty exposure only after applying the complete test and any exceptions.
Overtime at peak
Overtime is time and a half over 40 hours a week, and California adds daily overtime over 8 hours. The federal salary threshold for the white-collar exemptions is $684 a week, and California and New York set higher state thresholds. As of Oct 2026.
29 USC 207; Cal. Lab. Code §510
Minimum wage depends on the state: federal $7.25 an hour, which Texas follows; California $16.90 from January 1, 2026; New York $17.00 in New York City, Long Island and Westchester and $16.00 elsewhere in 2026; Florida $15.00 from September 30, 2026. Local ordinances can be higher. As of Oct 2026.
Seasonal hires need the same onboarding as anyone else: Form I-9 within 3 business days of starting work, E-Verify for Florida private employers with 25 or more employees, and workers' compensation in California, New York and Florida once you have employees (in Florida, 4 or more in non-construction trades). Most Texas private employers can opt out, but then lose common-law defenses. As of Oct 2026.
An assistant abroad and a designer at home
Status, whether the person is an individual or an entity, and where the services are performed decide the paperwork. Where the person lives is not enough on its own.
- A US freelancer: collect Form W-9 before the first payment. For payments made in 2026, file Form 1099-NEC for nonemployee compensation of $2,000 or more, subject to exceptions. As of Oct 2026.
- A properly classified non-US individual providing services wholly abroad: document foreign status, usually on Form W-8BEN; entities generally use W-8BEN-E or another W-8 form. Generally no Form 1099-NEC is issued for those foreign-source services.
- A US citizen or other US person living abroad: Form W-9, not W-8BEN. Location alone never removes reporting.
For example, a seller pays a Philippines assistant $14,000 and a US designer $2,400 in 2026. If the assistant is a properly classified individual who is not a US person and works wholly in the Philippines, collect Form W-8BEN, and generally no Form 1099-NEC is issued. The designer gives a W-9 before the first payment, and $2,400 is over the $2,000 threshold, so unless an exception applies a Form 1099-NEC goes to the IRS and the designer by February 1, 2027. A US international-tax CPA confirms both.
IP from freelancers needs a signed writing
Get a signed written assignment of copyright in designs, photography and code from every agency and freelancer, or rely on work made for hire only where the statute allows. As of Oct 2026.
17 USC 204(a)
In California, a commission plan, including one for creators or sales staff, must be in writing and signed (Cal. Lab. Code §2751).
Asked in Greymill
Packers: packing is part of an online store's usual business, which creates high risk under California's ABC test for who counts as an employee. Keep records of how they work, and have employment counsel apply the full test before you treat anyone as a contractor.
Your VA: if they are a properly classified individual, not a US person, working wholly in the Philippines, collect Form W-8BEN. Generally no Form 1099-NEC.
Your designer: Form W-9 before the first payment. $2,400 is over the $2,000 threshold, so unless an exception applies, a Form 1099-NEC goes to the IRS and the designer by February 1, 2027 (As of Oct 2026).
And the designs: get a signed written assignment of copyright from the designer.
A US international-tax CPA should confirm both forms. LEO can draft the assignment.
Ask it about your own business
Paste this into Greymill with your own figures, and Staff & HR works it through for your business.
I run an online shop in [state], in the US. I have [number] packers paid as [employees or contractors], an assistant in [country] paid [$ a year], and freelancers [roles and states] paid [$ a year]. Tell me the classification risks, the forms I need from each person, what I must file, and what to put in their contracts.
More for online retail and ecommerce in the US
- Knowing what an order earns after landed cost, tariffs, free shipping and returnsWork out contribution margin per order with duty in your landed cost, the ROAS you need to break even, and what a tariff change does to both.Read the lesson
- Paying for inventory and ads weeks before the platforms pay youBuild a 13-week cash flow on real payout timing, plan for reserves, holds and chargebacks, and turn any revenue-based advance into an APR before you sign.Read the lesson
- Sales tax when Amazon collects some of it and your stock sits in other statesHow economic and inventory nexus work for an online seller, what marketplace facilitator laws do and do not cover, the state income tax and tariff refund traps, and why to clean up past exposure before you sell.Read the lesson
- Proving the products you import or private-label are legal to sellIf you import or private-label, you are in the chain the law holds responsible: the certificates, testing, warnings and reports your products need before they go live.Read the lesson
- Shipping promises, a refund policy that holds up, and the 3PL clause that caps your lossFederal and state rules decide what your shipping times, refund policy, warranties and subscriptions must say, and your 3PL and supplier contracts decide who pays when stock is lost.Read the lesson
- Reviews, creators, texts and 'Made in USA': selling harder without a penalty or a lawsuitThe federal and state rules that govern how online stores win customers: reviews, influencer disclosure, origin claims, pricing, email, texts and marketplace verification.Read the lesson
- A Prop 65 notice or a website accessibility demand letter has arrivedWhat to do in the first days after a Prop 65 60-day notice or an ADA website demand letter, and how to make the next one less likely.Read the lesson
Open the interactive lesson · Every online retail and ecommerce lesson · What Greymill knows about the trade
Sources
The primary sources behind this lesson, checked Oct 2026.
- 29 USC 206(a)(1) (People: warehouse, seasonal staff and contractors)
- Minimum wage (People: warehouse, seasonal staff and contractors)
- Minimum wage schedule (People: warehouse, seasonal staff and contractors)
- Florida minimum wage notice; Fla. Const. art. X §24 (People: warehouse, seasonal staff and contractors)
- 29 USC 207(a); Lab. Code §510 (People: warehouse, seasonal staff and contractors)
- Overtime rule status (People: warehouse, seasonal staff and contractors)
- Rev. Proc. 2025-32, gross receipts test (Federal tax: entity, inventory, depreciation and 1099S)
- FTB conformity tables (Federal tax: entity, inventory, depreciation and 1099S)
- Threshold (Federal tax: entity, inventory, depreciation and 1099S)
- IRC §111 (Federal tax: entity, inventory, depreciation and 1099S)
- IRS 1099-K page, "Who gets Form 1099-K" and third-party settlement organization threshold (Federal tax: entity, inventory, depreciation and 1099S)
- IRS Publication 946, "What's New for 2026" and "100% special depreciation allowance" (Federal tax: entity, inventory, depreciation and 1099S)
- IRC §7503 (The US calendar: sales tax, payroll, 1099-NEC, franchise tax and peak)
- Due dates (The US calendar: sales tax, payroll, 1099-NEC, franchise tax and peak)
- Filing and payment (The US calendar: sales tax, payroll, 1099-NEC, franchise tax and peak)
- Filing (The US calendar: sales tax, payroll, 1099-NEC, franchise tax and peak)
- When to file (The US calendar: sales tax, payroll, 1099-NEC, franchise tax and peak)
- Due dates (The US calendar: sales tax, payroll, 1099-NEC, franchise tax and peak)
- 16 CFR Part 465; 16 CFR 1.98 (Hard cases: sales tax, FEDERAL tax, cash and exit)
- 34 TAC §3.286 (Hard cases: sales tax, FEDERAL tax, cash and exit)
- 15 USC 381 (Hard cases: sales tax, FEDERAL tax, cash and exit)
- Tax Law §1141(c); R&TC §6811 (Hard cases: sales tax, FEDERAL tax, cash and exit)
- UCC §7-209 (Contract red flags)
- UCC §7-204(b) (Contract red flags)
- 17 USC 204(a) (Contract red flags)