What Should an Independent Sales Rep Agreement Include?
An independent sales rep agreement for a wholesale brand should put four things in writing: that the rep is an independent contractor, which territory and accounts they cover (including exclusivity and house accounts), when commission is earned and paid, and what the rep is owed after the agreement ends. Brands using both a showroom and road reps should also say who is credited on a shared order.
Key takeaways
- Settle territory and commission timing first, because most other clauses depend on them.
- Define the commission base, the payment schedule, and how returns and chargebacks are handled.
- Name house accounts in a signed exhibit before the rep starts.
- Texas, Arizona and Colorado penalize unpaid rep commissions. Check the law in every state where your reps sell.
What clauses belong in an independent sales rep agreement?
| Clause | What to decide | What goes wrong if it's vague |
|---|---|---|
| Contractor status | You control results, not methods | The relationship looks like employment |
| Territory and exclusivity | Areas or accounts covered; other lines allowed | Two reps pitch one buyer |
| House accounts | Accounts the brand keeps | Disputes over who earned an order |
| Commission | Base, when earned, when paid, returns | Arguments over discounts and unpaid invoices |
| Splits | Credit when two reps touch an order | Double commission, or none |
| Order authority | Who accepts orders and sets terms | A rep promises terms you won't honor |
| Termination | Notice, post-term commissions, samples | Claims on years of reorders |
How should the agreement handle independent contractor status?
State that the rep is an independent contractor, then run the relationship that way, because the label alone doesn't decide it. Under the IRS's definition, someone is an independent contractor when the payer can control only the result of the work, not what will be done and how. States can also apply their own tests. The agreement can set sales goals, approved prices and terms, and standards for showing the line. It shouldn't dictate the rep's hours, route or daily schedule.
How do you define territory and exclusivity in a rep agreement?
Territory is the area or set of accounts a rep covers. Define it so it can't be read two ways: named states or regions, store types, named accounts, or a mix. Say whether online retailers and national chains fall inside a geographic territory.
Exclusivity is a separate decision. An exclusive territory means the brand won't appoint another rep there. Also say whether the rep earns on orders from that area that they didn't write themselves. Then cover the reverse: which other lines the rep may carry, and how they'll tell you about a competing one. If you also sell direct in the territory, address that too (see how to handle wholesale channel conflict).
What are house accounts, and how should the agreement treat them?
A house account is an account the brand keeps and services directly, so no rep earns commission on it. A law firm that represents sales reps describes house accounts as "usually larger or national accounts reserved and serviced directly by a company (the Principal) bypassing commissioned sales reps to avoid payment of large commissions."
Name house accounts in an exhibit when the agreement is signed, and say whether the brand can add more later. Give accounts that existed before the rep arrived their own rule: no commission, commission on reorders only, or full commission. Keep final approval of any new account a rep brings in (see how to approve new wholesale accounts).
When is a sales rep's commission earned, and when is it paid?
Start with the commission base, which is what the rate applies to: the invoiced amount, the amount shipped, or the amount the retailer actually pays. Say whether shipping, taxes and discounts come off first. Then separate two moments:
- Earned: at order acceptance, at shipment, at invoice, or when the retailer pays.
- Paid: on a fixed schedule, with a statement listing each order.
Earning on payment means the brand never pays commission on invoices that go unpaid, but it delays the rep's income. A wholesale showroom owner in a Reddit AMA on r/fashionstartup said reps "usually get paid after the order is shipped and paid for, adding another month or two if they do net." The payment terms you give retailers shape when reps get paid.
Cover returns, cancellations and chargebacks too, including whether commission already paid on a returned order comes off the next statement. Give the rep a right to check the records behind each statement.
How should commission be split between a showroom and road reps?
Many brands use a showroom at markets and road reps who visit stores between markets, so one buyer may deal with both. The agreements, or a split policy both sides sign, should decide:
- Whether credit follows the territory or whoever wrote the order.
- How commission divides when a showroom writes a market order for an account in a road rep's territory.
- Who earns on reorders that come in directly after a market order.
- Whether the showroom pays its inside staff from its own commission, so the brand pays only once.
Use identical split rules in every rep and showroom agreement.
What commissions are owed after a rep agreement ends?
Set a notice period for either side, then say which commissions survive the end of the agreement:
- Orders accepted before termination that ship or are paid afterward.
- Orders placed after termination from accounts the rep opened, if any, and for how long.
- Orders the rep pitched but didn't write.
Require the return of samples, line sheets and price lists, and say who keeps buyer contact data. Reps see their buyer relationships as their own asset, so be explicit about this.
Which state sales rep commission laws should brands check?
Three examples of state statutes protecting reps who solicit wholesale orders:
| State | What the statute requires |
|---|---|
| Texas | A contract to solicit wholesale orders in Texas must be in writing and state how commission is computed and paid, and the rep gets a copy. A clause putting venue outside Texas is void. If an agreement that doesn't meet these rules ends, commissions are due within 30 working days. Unpaid commissions can cost three times the amount plus attorney's fees, and these protections can't be waived, even by choosing another state's law. |
| Arizona | Commissions due at termination must be paid within 30 days, and commissions that become due afterward within 14 days. Unpaid commissions can bring treble damages, the prevailing party can recover attorney's fees, and accepting a payment doesn't release the rest. |
| Colorado | Knowingly failing to pay commissions owed under a written contract exposes the brand to treble damages plus fees. |
Other states have their own rules, so check each state where your reps sell, and have a lawyer review the agreement before reps sign. This is general information, not legal advice.
How can a brand track rep commissions once the terms are set?
Once terms are agreed, Brandboom's Commission Reports help apply them. Brandboom lets brands save a commission rate for each rep or showroom. The rate applies automatically when an invoice is created and locks in at that point. Commission recalculates when order totals change, returns are reversed at the original rate, and agent-team splits are managed in one place. Brand admins finalize a monthly report for each showroom, and brands can see every rep's orders by rep or territory in one dashboard.
FAQ
Can an independent sales rep be paid as a 1099 contractor?
Yes, if the relationship really is independent. Under the IRS definition, the brand can control the result of the rep's work but not how it's done, such as hours, routes or daily methods. Payments are reported on Form 1099-NEC. Calling someone a contractor in the agreement doesn't settle the question, and some states apply their own tests. How you manage the rep matters as much as the wording.
Is commission paid when an order ships or when the retailer pays?
That depends on what the agreement says. If you pay on collected invoices, you never pay commission on an order the retailer doesn't pay for. Reps would rather earn at shipment or invoice. Either way, define the base, the payment schedule, and how returns and chargebacks are deducted. In Texas, an agreement to solicit wholesale orders must state how commission is computed and paid.
Does a rep still earn commission after the agreement ends?
That depends on the agreement. A clear one says whether orders written before termination stay commissionable when they ship or are paid afterward. It also says whether the rep earns on later reorders from accounts they opened, and for how long. State law can apply too. Arizona, for example, requires commissions due at termination to be paid within 30 days, and those that become due later within 14 days.