Which file format should I use when publishing on Smashwords: Word document or epub?

Although you can submit your book as an epub file via Smashwords Direct, we consider this a secondary format. Ebook Launch recommends using a Word .doc file, since the Smashwords system is built around a formatted word document. Only in certain instances would an epub file be a better option. 

Some of the advantages to choosing a Word document file include:

• Multiple files formats within the Smashwords catalogue
• Search engine indexing of the book's preview
• Easily editable files using Microsoft Word
• Option to easily replace or update book covers

For a detailed discussion and explanation on the difference between Word document and epub files, please refer to the Smashwords Direct article here.