How to pay someone when signing up for free product on your site?

I would think you would be able to do this with out worrying about taxes. Although, you would definitely be better off consulting a tax professional.

Not sure why you would want to provide a free trial service and also pay them to sign up.

Also, depending on how you pay out or how the offer is made etc... you might need to be careful if it can be viewed as a pyramid or ponzi scheme as this could cause you more problems than any tax issues.

The following is what I found that should apply for US Federal taxes.

1099-MISC

Used to report miscellaneous income. This includes such diverse income sources as gaming prizes and awards (including those won on TV shows), rent, royalty payments, payments to crew members of fishing boats, crop insurance proceeds, payments to physicians or health service suppliers, and proceeds paid to an attorney. Any compensation to contract workers not considered employees is also reported on this form. The reporting threshold is $600, except for royalties, which must be reported above $10, and attorney fees, all of which must be reported. The obligation is typically on the payer, unless, as is often the case with royalties, payment is made to an agent on behalf of the recipient.


I hope this helps.

Good luck.