Multi-level marketing distributors and your income
Commissions, overrides, and the stock you bought yourself. Here is how to tell what is income and what is just spending.
You joined a selling network. There is a starter pack, a discount on products, commission on what you sell, and a share of what people below you sell.
Some people treat all of it as pocket money and think no further. Others treat it as a business from day one. The second group has fewer problems, and here is why.
Commissions and overrides are earnings
Money you receive for selling, and money you receive because people in your network sold, are both earned income. The second is not a gift for recruiting; it is a payment tied to activity, which makes it income like the first.
Companies paying these amounts usually deduct something before releasing them, and remit it in your name. If that is happening, chase the certificate showing what was deducted. It is an advance against what you will owe, and without the paper you cannot claim it.
Distributors who earn steadily are running a small business, which brings the ordinary obligations: registering, keeping records, issuing documents where required, and filing on schedule.
The part people get wrong: buying your own stock
Most networks encourage or require distributors to buy product. Some of it is resold, some is used personally, and some sits in a spare room.
That distinction matters more than anything else in this model.
Products you buy and resell are stock, and what you paid for them is a cost of the sales you make. Products you buy and consume yourself are personal spending, not a business cost, however loyal the purchase felt.
Distributors who count every purchase as a business cost end up with records that make no sense: large purchases, small sales, and a pile of unsold stock nobody counted. Distributors who count nothing lose the genuine costs they are entitled to recognise.
The honest approach is to keep the two separate at the moment of purchase, when you actually know which is which.
Am I making money, or moving money?
This is the uncomfortable question, and good records answer it.
Add up what you actually received in commissions and sales for a period. Subtract what you actually spent on stock, fees, events, samples, and travel. Look at what is left, and look at the unsold stock sitting in the house.
Plenty of distributors discover the real number is small, or negative, and that it was hidden by the fact that money was constantly moving. That is a business finding, not a tax one, but it is the most valuable thing a set of records will ever tell you.
For tax purposes it matters too, because you are taxed on what you earn, and knowing that figure requires knowing both sides.
Practical habits
Keep a simple record of every payout received, with the certificate showing anything deducted.
Record purchases in two columns: for resale, and for personal use. Do it as you buy.
Count your unsold stock occasionally. It is money sitting still, and forgetting it makes your results look better than they are.
Keep the fees and event costs. Registration fees, training events, travel, and samples are real spending, and whether they can reduce your taxable income depends on the approach you use for computing it.
Do not assume the company handles your obligations. It handles its own, and it handles what it deducts from you. Your registration and your filing are yours.
Earning from a selling network and unsure what counts as income or cost? Ask AskOnward for a plain answer from the official BIR rules, so you can see whether the business is actually working.
This article is for general information and is not affiliated with the government. For official forms and the latest rules, see the Bureau of Internal Revenue at bir.gov.ph.