Shop Houzz Closed: How Former Sellers Report 2026 Income, 1099-K, Unpaid Payouts and Leftover Inventory

If you sold on Shop Houzz, your sales from January through May 2026 are 2026 income, and you report them from your own settlement records whether or not a Form 1099-K arrives. If the platform never paid what it owed, an accrual-basis seller that already counted the money as income can deduct a business bad debt under IRC §166 once it is worthless; a cash-basis seller never counted it as income, so there is no bad debt to deduct. Leftover inventory stays on the books at cost until you sell or dispose of it.

How did Shop Houzz close?

Houzz launched on-site shopping in 2014, later branded Shop Houzz. According to Houzz's Terms of Use and Privacy Policy, from August 5, 2025 Shop Houzz has been operated by Cart.com Holdings 2, LLC under a license from Houzz. Houzz is neither the seller nor the operator, and Shop Houzz is the merchant of record for all purchases, handling orders, payments, returns and customer service.

Home Accents Today reported on May 13, 2026 on Shop Houzz's vendor notice dated May 7: the site stopped taking orders that morning; orders placed by May 7 had to ship by May 15 or be canceled and refunded; the business formally closed on May 22; vendors were told to export order histories and account records before then, after which the data would be archived; and final vendor disbursements were scheduled for June 30. As of November 2026, the Shop Houzz site says purchasing is no longer available and lists a support contact. Houzz.com and Houzz Pro continue to operate, but with no shopping function.

The platform is gone, but your 2026 return still covers the full year. Here is the order to work through it: income, sales tax, unpaid payouts, inventory.

How do you report January through May 2026 income?

Your settlement records decide income, not the 1099-K. The closure doesn't change the fact that those months' sales are your revenue. Record revenue as the merchandise amount, excluding sales tax the platform collected; commissions, ad charges and penalties the platform deducted are expenses; refunds and orders canceled after May 15 reduce revenue.

A 1099-K may or may not come. If you received more than $20,000 in more than 200 transactions through Shop Houzz in 2026, the operator should send a 1099-K by January 31, 2027. The One Big Beautiful Bill Act of July 2025 restored that federal threshold, and some states use lower ones. With the platform closed, the form may arrive late, show the wrong amount, or not arrive at all. If it comes, reconcile it line by line to your settlement records and list the differences (commissions, refunds, shipping, sales tax). If it doesn't, report from your records anyway.

Fill in missing records. If you didn't export order and settlement detail before May 22, request it in writing through the support channel on the Shop Houzz site and keep the emails. Bank deposits help, but they show only net amounts; you want the commission and refund detail too.

Do you owe the sales tax on Shop Houzz orders?

Generally no. As merchant of record, Shop Houzz charged the customer and generally collected and remitted the sales tax on those orders. Leave that tax out of your revenue. The tax column in the settlement report is your guide; if it shows particular orders where the tax was your responsibility, follow that state's rules.

Sales through your own website, wholesale accounts or designers are still yours to handle as before. If you registered in a state only because of Shop Houzz and now have no inventory or sales there, you can close the account through the state's process after filing every period due.

Can unpaid payouts be deducted as a bad debt?

It depends on your accounting method. A bad-debt deduction requires that the amount was already included in income (or is money you actually lent).

Accrual method. A business on the accrual method recorded the revenue when the goods sold and the platform acknowledged the payable. If by year-end the receivable is wholly worthless, it deducts a business bad debt under IRC §166; for a partially worthless debt, the uncollectible part must be charged off on the books before it can be deducted. Worthlessness needs evidence: written collection demands, the debtor's written response, or a bankruptcy or liquidation notice. While you are still collecting in the normal course and the debtor hasn't refused, it is usually too early.

Cash method. Many individual sellers and small LLCs report on the cash method, counting income only when received. Unpaid payouts were never income, so there is no bad debt; the effect already shows up as lower revenue.

If it's paid later. An amount deducted as a bad debt and later recovered is income in the year you recover it.

Example (hypothetical numbers, to show the method): a lighting seller's U.S. company on the accrual method had $120,000 of Shop Houzz merchandise sales in 2026, $18,000 of commissions, and $102,000 of payouts due. By year-end it received $94,000; repeated written demands for the remaining $8,000 went nowhere. It reports $120,000 of revenue and $18,000 of commission expense, and if it can show the $8,000 is uncollectible, it deducts an $8,000 bad debt for 2026. On the cash method, the same company would report only what it received and take no separate bad debt.

How do you book returned goods and leftover inventory?

Inventory stays at cost. Orders canceled or returned at closure reduce revenue. Goods back in your warehouse or 3PL stay in inventory at their original cost (purchase price, inbound freight, duty) and move to cost of goods sold when they sell on another platform.

Losses come when they happen. You recognize a loss or deduction when you actually sell below cost, scrap or donate goods. Damaged or obsolete goods may be valued at their actual offering price under Treas. Reg. §1.471-2(c), but you need the price lists or sales records from the time, not an estimate.

Where the inventory sits. A 3PL in a state still gives you physical presence there after you change platforms, so that state's sales tax and income or franchise tax still need a look.

What should you prepare before moving to another platform?

Split your 2026 books by platform and close out the Shop Houzz period on its own. Then look at your entity. A U.S. owner can keep using the same individual or LLC setup. For a Chinese owner's single-member LLC, decide before onboarding whether the new platform gets a W-9 or the owner's W-8 and whether a Form 8832 election to be taxed as a C corporation makes sense; the LLC's annual pro forma 1120 + Form 5472 can't be skipped, at $25,000 per missed form.

What Houzz is still good for, how Wayfair, Walmart and Amazon compare for home goods, and how to choose an entity are covered in our Houzz sellers guide. To have us look at your settlement records and unpaid payouts, book a free 15-minute consultation or reach us on WeChat at YCLUSA.