Article

Tax on a records licence: what to ask

By TrustPast

Updated October 29, 2026

A buyer offers to pay your company for the estimates and job files it has kept for years. Before the money comes, someone in the office asks how it will be taxed. Nobody at the table knows, and the buyer’s pages don’t say. This page settles what you can know before you see an accountant: what micro1 publishes about the payment, what official IRS pages say in general, and the questions and records to bring to the meeting.

One line before anything else. We, TrustPast, are not accountants, and nothing on this page is tax advice. We quote IRS pages as they read on 29 October 2026, and we never say how your payment is taxed. Your accountant does that.

The short answer

We can’t tell you how a records licence payment is taxed, and nor can a web page. The answer depends on facts only your company has. What the agreement grants. Which entity gets paid. When the money arrives. Where the company files.

What we can do is help you arrive at the accountant’s office with the right papers and questions. Three documents answer most of them: the agreement, the invoice and the payment record.

Apply & License Your Data

What micro1 publishes about the payment

Start with the buyer’s own words, because your accountant will want them.

On what the deal is: “We license data generated through your company’s everyday operations.”

On who owns the records afterwards: “Companies retain ownership of their underlying data.”

On payment: “We pay in full within 30 days of acceptance, with payments typically ranging from $150K to over $2M” (indicative, not an offer).

On timing, in its questions and answers: “Once your company transfers its data, micro1 has 30 days to review and approve it.” And: “After the data is approved, we’ll ask your company to submit an invoice, and payment will be made within 30 days of invoicing.”

On its referral page, company compensation is listed “for approved data packages”. For companies that have stopped trading, the same page says “We are acquiring data from companies that are no longer operating.”

micro1 publishes nothing on tax, on whether it sends a Form 1099 to a company it pays, or on how a company payment is made. Ask on the call, and pass the answers to your accountant.

What the IRS says about royalties, in general

We found no IRS page on records licences. It does write about royalties. Here is what it says, quoted, with no conclusion drawn.

Publication 525, the 2025 edition, says: “Royalties from copyrights; patents; and oil, gas, and mineral properties are taxable as ordinary income.” It goes on: “In most cases, you report royalties on Schedule E (Form 1040). However, if you hold an operating oil, gas, or mineral interest or are in business as a self-employed writer, inventor, artist, etc., report your income and expenses on Schedule C (Form 1040).”

It describes copyright and patent royalties as “amounts paid to you for the right to use your work over a specified period of time.”

The 2025 Schedule E instructions list what goes on line 4: royalties from oil, gas or mineral properties (not including operating interests), from copyrights, from name, image and likeness rights, and from patents. They add: “If you are in business as a self-employed writer, inventor, artist, etc., report your royalty income and expenses on Schedule C, not on Schedule E.”

Two things stand out, as our own reading. First, these pages are written for people filing Form 1040, not for a company filing its own return. Second, none of them names business records. Whether a licence of job files is a royalty, a fee, business income or something else is exactly the question you bring to your accountant. Don’t guess it from a list.

Which entity receives the payment

This is often the first question an accountant asks. The IRS Tax Topic 407 page on business income says “A business may be organized as a sole proprietorship, partnership, or corporation.”

It then sets out how each one reports. “A sole proprietor files Schedule C (Form 1040).” A partnership “reports its income and expenses on Form 1065” and “doesn’t pay income tax” itself. “Corporations report their income and expenses, and calculate their tax on Form 1120.” S corporations “file Form 1120-S” and, like a partnership, generally don’t pay income tax themselves. For a limited liability company, the IRS “will treat an LLC as either a corporation, partnership, or as part of the LLC owner’s Form 1040 series tax return.”

So the IRS sets out a different return for each kind of business. As our own advice, check that the name on the agreement, the name on the invoice and the name on the bank account are the same legal entity. If they aren’t, ask your accountant before you sign.

Licence or sale

micro1 calls its deal a licence. Its closed-company line uses the word acquiring. Our page on whether it is a licence or a sale of your records goes through what each word means in a contract.

The difference may matter for tax too. We can’t say how. What we can show is that the IRS itself separates the two in at least one setting. Publication 525 says: “If you sell your complete interest in oil, gas, or mineral rights, the amount you receive is considered payment for the sale of section 1231 property, not royalty income.” The Schedule E instructions add: “You may be able to treat amounts received as ‘royalties’ for the transfer of a patent or amounts received on the disposal of coal and iron ore as the sale of a capital asset.”

Those lines aren’t about your records. As our own reading, they show only that the label on a payment doesn’t settle its treatment. Your accountant will read the grant clause.

One payment or several, and the year it arrives

micro1 says it pays “in full”. It doesn’t say whether a records licence brings one payment or several. Our page on whether a records licence is paid once or over time covers what micro1 publishes on that.

The year matters to every accountant. Publication 525 has a paragraph on constructively received income: “If you’re a cash-method taxpayer, you’re generally taxed on income that is available to you, regardless of whether it is actually in your possession.” It adds that a valid cheque made available before the end of the tax year “is considered income constructively received in that year, even if you don’t cash the check or deposit it to your account until the next year.”

On advance payments it says: “Generally, you report an advance payment for goods, services, or other items as income in the year you receive the payment.” It then notes an exception for some taxpayers on an accrual method.

Those paragraphs sit in a publication for individuals, and your company may use a different accounting method. As our own advice, give your accountant the dates micro1 publishes: up to 30 days to review, then payment within 30 days of your invoice. If the records move in November, ask which year the money falls in.

Form 1099: what the IRS asks of payers

The Instructions for Forms 1099-MISC and 1099-NEC, dated December 2026, say to file Form 1099-MISC “for each person in the course of your business to whom you have paid” “At least $10 in royalties”. Box 2 is for royalties, and the instructions say “Use box 2 to report royalty payments from intangible property such as patents, copyrights, trade names, and trademarks.”

The same instructions list exceptions. Among the payments for which a Form 1099-MISC is not required: “Generally, payments to a corporation (including a limited liability company (LLC) that is treated as a C or S corporation).” They also say the payer must “furnish the payee statements by January 31”.

As our own reading, that is three facts and no conclusion. micro1 doesn’t publish whether it will send any form. Whether your payment is a royalty is your accountant’s call. Ask them either way.

A closed or dissolved company

micro1 publishes a separate partnership for companies that are no longer operating, with the same “30+ employees” requirement. If your company has wound down, the tax questions come earlier, not later.

The IRS page on closing a business says: “You must file a final return for the year you close your business.” For a corporation: “You must file Form 966, Corporate Dissolution or Liquidation, if you adopt a resolution or plan to dissolve the corporation or liquidate any of its stock. You must also file your corporation’s final income tax return.” It adds: “We cannot close your business account until you have filed all necessary returns and paid all taxes owed.”

As our own reading, a payment that arrives after a final return raises real questions: which return reports it, whether the entity can still receive it, and who signs the invoice. Take them to your accountant and your lawyer before anything is signed. Our pages on whether a closed company can still license its records and on closed companies cover the rest.

State tax

The IRS pages point you to your state, so we will too. The Schedule C instructions say: “You may be subject to state and local taxes and other requirements such as business licenses and fees. Check with your state and local governments for more information.” The closing-a-business page says: “Remember to check your state responsibilities when closing a business.”

We don’t cover any state’s rules. If your company works in one state and is registered in another, tell your accountant on the first call.

The records to keep for your accountant

The IRS page on what records to keep says supporting documents “support the entries in your books and on your tax return.” For gross receipts, it lists “Deposit information (cash and credit sales)”, “Invoices” and “Forms 1099-MISC” among the documents to keep.

As our own advice, for a records licence that means one folder with:

The signed agreement. The grant clause, the payment clause and any clause on later deliveries.
The acceptance notice. The date micro1 approved the records, in writing.
Every invoice you send micro1. Dated, with the amount and the legal name of the payee.
The payment record. The bank entry for each payment received, with the date it cleared.
Any form micro1 sends. If one arrives.
Your correspondence on dates and amounts. The emails that fix when the clock started.

How long to keep it is a question for your accountant too. The IRS page on keeping records gives 3 years as the general period. It lists longer periods: 6 years “if you do not report income that you should report, and it is more than 25% of the gross income shown on your return”, 7 years for a loss from worthless securities or a bad debt deduction, and “indefinitely if you do not file a return.”

The questions to bring to your accountant

As our own list, not tax advice, here are the six we would bring, with the draft agreement on the table.

What is this payment, for tax purposes? A licence fee, a royalty, business income or a sale. Bring the grant clause.
One payment or several? If several, how each one is treated and in which year.
Which entity receives it? The legal name on the agreement, the invoice and the bank account, and the return it lands on.
Which year does it fall in? Given the transfer date, the 30-day review and the invoice date.
What about the state? Where the company files, and whether more than one state is involved.
If the company has closed, who reports it? The final return, the dissolution filings and who signs.

Ask before you sign, not after the money arrives.

Finding an accountant

If you don’t have one, the IRS page on choosing a tax professional says there are “various types of tax return preparers, including certified public accountants, enrolled agents, attorneys, and many others who don’t have a professional credential.” It says its “Directory of Federal Tax Return Preparers with Credentials and Select Qualifications can help you find preparers in your area who currently hold professional credentials recognized by the IRS.”

As our own advice, the accountant who already does your company’s return is the right first call. They know the entity, the accounting method and the state. If the agreement also needs a legal read, our page on whether you need a lawyer to license your records shows how to brief counsel for one task. Our page on what licensing your records costs counts the time involved.

What is actually being licensed

It helps to tell your accountant what the buyer is paying for, because it is not what most owners assume. micro1 says it is “looking for data that reflects how work is actually performed within an organization.” Its announcement says it uses “de-identified company data” to build environments “that reflect real business operations”.

The records are de-identified before use. Customer names and payments are never what is wanted. What is wanted is how the work was done: how an estimate became a job, how a change order was settled, how a repair was diagnosed. Our cornerstone page on what data buyers want from a trade business goes through the files that carry that value.

What this means for an HVAC company

Here is one company, as our own example and not a case micro1 publishes. Say an HVAC contractor with 45 people and eighteen years of records in its field service and estimating software. micro1’s requirement is “30+ employees,” so it is in range. Our page on companies with 30 or more staff covers the lane.

What it licenses. Estimates with every revision. Work orders with the technician’s notes on what was tested and what failed. Change orders on replacement jobs, with the reason. Service histories by site. Our pages on estimates and quotes and job files and work orders show what a complete record looks like.

What it keeps for the accountant, if it is still operating. The draft agreement, sent before signing. The legal name the invoice will carry, checked against the bank account. The acceptance notice, the invoice and the bank entry, in one folder. A note of the company’s year end, so the invoice date is chosen with it in mind.

What it keeps, if it closed last year. All of the above, plus the final return and any dissolution filings. The name and authority of whoever will sign for the company now. The bank account the money will go to, and whose it is. The owner calls the accountant before the discovery call, not after.

What it doesn’t do. It doesn’t assume the payment is taxed like a service job, and it doesn’t assume a form will come.

Worth two minutes to see your range before you call the accountant? Our estimate asks five questions. The range is ours, not an offer. micro1’s own payout page calls its figure an “Indicative estimate only” and says “Final payout is determined based on data sources, volume, quality, access terms, and due diligence.”

What is never included

micro1 doesn’t publish a fixed exclusion list. It says personal and identifying information is removed or transformed before your data is shared with third parties. Before any participation, it says, “together we confirm” the protections that apply.

What follows is our own advice, not micro1’s. Keep these out unless micro1 agrees otherwise in writing: attorney-client privileged records, health information, payment-card and financial-account details, Social Security numbers, minors’ data, biometric data, and classified or export-controlled material. Add anything a client owns under its contract with you, and the customer list itself.

On a tax page there is one more item. Your own tax returns, your accountant’s working papers and your payroll files stay out. They show what the company earned, not how it worked. Our page on what is never included in a records licence shows where these records hide. Our How it’s safe page gives the short version.

Where we fit

We, TrustPast, explain how this works and give you a range with our estimate. You apply to micro1 yourself, through the button below. micro1 pays us a referral fee. Your company pays us nothing.

We are not accountants or lawyers, we give no tax or legal advice, and we never handle your payment. The money goes from micro1 to your company, and what happens after that is between your company and its accountant.

TrustPast

Questions and answers

How is a records licence payment taxed?

We can’t tell you. We, TrustPast, are not accountants, and nothing on our pages is tax advice. micro1 publishes nothing on tax. How a payment is treated depends on what the agreement grants, which entity receives it, when it arrives and where the company files. Those are questions for your accountant, with the draft agreement in hand.

Is a licence payment a royalty?

That is for your accountant to decide. IRS Publication 525 says royalties from copyrights and patents “are amounts paid to you for the right to use your work over a specified period of time.” micro1 describes its deal as a licence: “We license data generated through your company’s everyday operations.” Whether your payment fits any IRS category is not something a web page can settle.

Will micro1 send a Form 1099?

micro1’s public pages don’t say. The IRS instructions for Form 1099-MISC say a payer files one for royalties of at least $10, and that payments to a corporation are generally not reported on it. Ask micro1 what it will send, and ask your accountant what you need either way.

Our company has closed. Who reports the income?

Ask your accountant before anything is signed. The IRS page on closing a business says “You must file a final return for the year you close your business,” and that a corporation files Form 966 if it adopts a plan to dissolve. A payment that arrives after that raises questions only your accountant can answer for your company.

Which records should we keep for the accountant?

As our own advice: the signed agreement, every invoice you send micro1, and the bank record of each payment received. The IRS lists invoices, deposit information and Forms 1099-MISC among the documents that support gross receipts. Keep the acceptance notice and your correspondence on dates too.