Key figures
District of Columbia payables
2026, with sources
1099s follow residence
DC’s information-return rule follows the payee’s residence: copies of federal Form 1099 reporting $600 or more paid to a DC resident individual go to OTR by January 31 through MyTax.DC.gov, electronically when there are 25 or more. If DC tax was withheld from a 1099 payment, the payer also files Form FR-900NP, the annual return for withholding reported on 1099s.
An example: a startup pays three freelance designers $5,000 each in 2026, one living in DC and two in Virginia. It files one 1099-NEC with OTR, for the DC resident, and none for the others.
Use tax on software and services
DC’s sales tax reaches a long list of services, including data processing and information services. The statutory definition of data processing covers computerized data and information storage and manipulation, the provision of access to computer systems, and any system or application programming or software, and digital goods include those accessed by subscription. A company in DC buying SaaS, hosting or data services from a vendor that doesn’t collect DC tax owes 6% use tax.
Accounts payable needs a step for it: flag untaxed software and data invoices each month and report the use tax on the company’s DC return.
Contractors
DC has no special contractor test for most industries; the Attorney General enforces misclassification under DC wage law, and recent settlements have required companies to reclassify app-based workers as employees. For an office-based startup, the practical question is the federal and DC wage-law analysis, and whether the person is doing the company’s core work under its direction.
The federal baseline
This page covers what District of Columbia adds. The federal rules underneath it apply here too.
Common questions
Do we file 1099s with DC?
Only for DC residents. OTR wants copies of federal 1099s reporting $600 or more paid to a DC resident individual, filed by January 31, electronically if there are 25 or more. A contractor living in Maryland or Virginia is reported to the IRS and, if their state asks, to that state.
Do we owe DC use tax on SaaS we buy?
Very likely, if the software or service is used in DC and the vendor didn’t charge DC tax. DC taxes data processing services, which its statute defines to include computerized data storage and any system or application software, and digital goods accessed by subscription. The buyer owes the same 6% as use tax.
Payables next door
- MDMaryland payablesMaryland wants 1099s only when Maryland tax was withheld, classifies workers for unemployment with the ABC test, and since July 2025 taxes the software and IT services a company buys.
- VAVirginia payablesVirginia presumes workers are employees, requires new independent contractors to be reported within 20 days, and wants 1099s only when Virginia tax was withheld. SaaS purchases carry no use tax.
Founder guides on this
- PeopleContractor or employee? Classification for startupsContractor or employee depends on control, not the contract. The IRS test, state rules, 1099s, payroll registration and the cost of getting it wrong.
- ComplianceFirst-year compliance calendar for a Delaware C-corpDelaware franchise tax, 1099s, the federal return, payroll filings, state annual reports and sales tax: the deadlines a young C-corp misses most, by month.
More of the District of Columbia guide
- AccountingAccounting and state tax in District of ColumbiaCorporate tax, conformity to federal rules, apportionment and what it does to your books
- ReceivablesReceivables and sales tax in District of ColumbiaSales tax registration, economic nexus, whether SaaS is taxable, and collecting from customers
- PayrollPayroll taxes and employer rules in District of ColumbiaWithholding, unemployment insurance, paid leave, minimum wage and the rules on paydays
- ComplianceCompliance and filings in District of ColumbiaRegistering to do business, annual reports, franchise tax and the filing calendar
- AdvisoryAdvisory: credits and decisions in District of ColumbiaCredits, incentives and the decisions that are cheaper to get right the first time
Sources
Checked against each agency’s own page on . Rates and thresholds change, usually on January 1.
General information for US companies, not tax, legal or accounting advice for yours. Rules and thresholds change; confirm the specifics with a CPA or the agency before you act on them.