Influencer Payment Regulations in

USA

Playbook

The most common payment method used to pay influencers in the USA is PayPal and bank transfers.

Sole proprietors in the USA may issue invoices without being bound by too many restrictions or formal requirements. In the USA there are practically no requirements regarding the content of the invoice, however, it is always recommended to follow best practices.

In the USA, businesses may outsource invoicing operations to a third party or the customer if certain circumstances are met. You may use self-billing if the parties have agreed to use self-billing before issuing the invoice. The agreement should preferably be in writing and specify the terms applicable to the self-billing invoice.

As a general rule, gifts are considered to be a form of compensation, and influencers should therefore always report the value of gifts, free travel, and vouchers to their tax authorities. The taxable value is usually based on the commercial value of the gift, travel, or voucher.

It is not uncommon for companies to be legally required to report to tax agencies when they pay out compensation to an influencer. Influencer partnerships are quite different from regular partnerships, compensation may not only include monetary compensation but also gifts, vouchers, and travel. In some countries, all types of compensation sent for “payment” to the influencer should be reported. Therefore, it may be relevant to verify your reporting responsibilities on that matter.

‍Exchange of income statements to other countries.

As mentioned above, it is not uncommon for companies to be legally required to report to tax agencies when they pay out compensation to an influencer. This obligation may also be applicable if you are working with an influencer from another country. Many countries sign bilateral agreements in which they agree to exchange income statements with each other. This allows tax agencies around the world to have a better overview of the compensation paid out to the people conducting business in their country and better control over who should pay taxes or not. The exchange of income statements is especially relevant when paying out compensation to individuals without a registered activity. It is therefore important to verify your reporting obligations in your country.  

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Additional responsibilities - social fees, withholding of taxes, more

Before drafting an agreement with an influencer, it is important to consider if the person has a registered activity as an influencer or a company. If the influencer is acting as an individual without any registered activity, it is essential to be aware of applicable rules and regulations, as you may have additional responsibilities towards the individual. It is important to understand what legal obligations apply to you. It is important to be fully aware of all the responsibilities before drafting any agreement with an influencer as you may be able, depending on the applicable laws and regulations, to put some of the responsibilities onto the influencer if it is clearly stated in the agreement. It is also important to consider any potential liabilities arising from the agreement. As such, the responsibility of each party should be clearly described in the agreement and preferably regulate topics such as the payment of indirect and direct taxes, reporting to tax authorities, or even social costs.

In most countries, influencer marketing is already regulated by national laws such as consumer protection and marketing laws or specific guidelines.

Considering influencers can reach consumers globally, examining legal implications in various countries is important. Violating the rules can lead to penalties, fines, and legal fees.

It's important to note that there are topics that are usually more strongly regulated within influencer marketing. These commonly include:

• Children and minors.
• Alcohol, religious beliefs, adult content, tobacco, cosmetic procedures, gambling products, and in certain countries politics.

Work on this is progressing quickly both on a national and a global level. It would therefore be wise to keep yourself updated on new laws and guidelines being issued on the topic.

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Influencer marketing regulations in the USA

The authorities, both on a federal and state level, have been very active in the last year when it comes to publishing guidelines and new codes of conduct for influencers in the USA.

The Guides Concerning the Use of Endorsements and Testimonials in Advertising, states inter alia that endorsements must reflect the honest opinion of the influencer and when there is a connection between the influencer and the company being endorsed/advertised that might materially affect the weight or credibility of the endorsement, such connection must be fully disclosed.

No later than 26 July this year, the Federal Trade Commission (FTC) updated its Endorsement Guides to include virtual influencers. One of the points that got the most attention is that the definition of endorsers was updated to include what “appear[s] to be an individual, group, or institution.” You may read more about this in our blog article.

Parallelly, Illinois became the first state to pass a law (S.B. 1782) that establishes safeguards to protect the earnings of minors who are featured in videos online. The law goes into effect on January 1, 2024, and applies to vloggers who create compensated video content featuring minors under 16. If certain conditions are met, the blogger will need to allocate a portion of their earnings to a trust account to be preserved for the benefit of the minor upon reaching the age of majority. This amount should be at least half the percentage of the video featuring the minor. For multiple minors, the earnings are evenly split among trust accounts, regardless of their screen time, to benefit them when they come of age.

You may also find a research guide on influencer marketing on the webpage of the Library of Congress.

Risk of false self-employment

If you are looking to collaborate with independent workers, it is essential to treat them as such. Influencers working independently should be treated differently from employees. It is crucial to provide them with creative and personal freedom, allowing them, for example, to choose and determine their activities and working hours. To prevent a relationship that could be seen as an employment relationship, it is imperative to draft a clear agreement between the two parties. If the relationship is too close to an employment relationship, it may be viewed as false self-employment. This may come with legal implications for the brand. Without an unambiguous agreement, a clear distinction is not always easy; both influencers and those who use them are often unaware of how the relationship can be viewed by the authorities.

As a rule of thumb, the more instructions you give regarding the services to be performed and the more the person is bound to your organization, the more likely it is that an employment relationship exists. To ensure that your relationship with the influencer is as unambiguous as possible, it is important to make sure that the agreement that is established is fair and offers them the autonomy to choose their activities and working hours. Also, the relationship should be independent in facts not only on paper. This should allow for a successful collaboration. In the case of false self-employment, the brand or agency may be responsible for paying employer fees and social costs for the influencer.

An Agreement can take many forms and does not necessarily have to be in writing. However, it’s usually recommended to sign a written Agreement with the digital creator before they start to work on a project. We recommend having a legal professional review the agreement before it's signed, to ensure that it covers all the necessary legal aspects relevant to the relationship at hand. It may be relevant to define the following points in the agreement:

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1. Define Compensation Structure and Amount

Begin by specifying the type and amount of compensation the influencer will receive for their services. This can be a flat fee, commission-based, or a combination of both. Be transparent about the compensation structure and ensure that the influencer understands whether they are considered an employee or an independent contractor, as this has tax implications.

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2. Outline Payment Schedule and Currency

Establish a clear payment schedule that details whether the influencer will receive a one-time payment or multiple installments. Also, specify the currency in which payments will be made, and discuss potential fluctuations in exchange rates to avoid confusion or disagreements.

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3. Specify Payment Terms for Content Creation and Sharing

One important consideration is whether payment should only be made upon delivery of the post or if there should be two separate fees, one for creating the content and another for sharing it upon approval by the Brand. Clearly state these terms in your agreement to ensure both parties understand when and how payments will be made for each aspect of the influencer's work.

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4. Detail Payment Methods and Third-Party Involvement

Outline the method of payment, whether it's PayPal, wire transfer, or through a third party. If you're using a third-party service provider, such as Gigapay, to handle payouts and reporting, include this information in the agreement. This helps set expectations and ensures the influencer knows who will send the payment and when to expect it.

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Want to know more about influencer partnership agreements? Use this guide to ensure your agreements cover all essential aspects and foster long-lasting, mutually beneficial relationships with your influencers.