How to handle sales tax reported on 1099 K for tax purposes?
Sales tax reported on 1099 K is throwing me for a loop. How is it handled on taxes? I should not be taxed on sales tax as income.
How to handle sales tax reported on 1099 K for tax purposes?
Sales tax reported on 1099 K is throwing me for a loop. How is it handled on taxes? I should not be taxed on sales tax as income.
9 replies
Seller_Hi7wbO2Kbo6bl
Ignored.
That form is for income tax purposes.
Sales tax is not income -- or if you report it, then it needs to be backed out because none of the money is ever in your possession -- just bookkeeping smoke and mirrors.
Seller_nRFmxiQg4EGrw
The sales taxes collected are reported as part of the 1099K, and are listed on page two (AFAIK, only Amazon does this).
After entering the amount of your 1099K on Schedule C, you enter various deductions, such as shipping costs, COGS, refunds, selling and other fees, etc., as well as things like mileage, home office deduction, supplies, and so on. This is also where you can enter the taxes that were collected and reported on the 1099K; the IRS does not have a line to specify that, but there are blank lines where you can write in a deduction; such as "Marketplace Facilitator Sales Tax Collected".
Seller_nRFmxiQg4EGrw
Yes, the 1099K is for income tax purposes, but be aware that the amount reported includes all the sales tax that was collected.
Seller_xo4Akj7FBBnfC
As stated on the 1099-K Information page, the box 1a 'Gross amount' reported to the IRS is the total of the following values, some of which you might not expect to see reported as income:
- Product sales (non-FBA)
- FBA product sales
- Shipping credits
- Gift wrap credits
- Promotional rebates (typically negative)
- Product, shipping, gift wrap taxes and regulatory fee collected
In the Seller Central Reports Repository, we download the full-year Date Range Summary Report and include all of the above items as income in QuickBooks to (very nearly) match the 1099-K.
Amazon always has a slight discrepancy (typically less than 0.1%) between the total of these items in its Summary Report and the 1099-K box 1a; other sellers have suggested that this is because Amazon uses an inconsistent mix of cash and accrual accounting methods in its Summary Report and 1099-K.
Some sellers adjust their books to show an exact match with the 1099-K, but we prefer to submit to the IRS the amounts in the Summary Report so that we can show that report in the event of an IRS audit.
We include following values (positive and negative) from the full-year Summary Report as expenses in QuickBooks:
- Adjustments
- Cost of Advertising
- FBA inventory credit (typically positive)
- FBA inventory and inbound service fees
- FBA product sale refunds
- FBA selling fees
- FBA transaction fee refunds (typically positive)
- FBA transaction fees
- Amazon Obligated Tax and Regulatory Fee Withheld
- Product, shipping, gift wrap taxes and regulatory fee refunded
- Promotional rebate refunds (typically positive)
- Refund administration fees
- Selling fee refunds (typically positive)
- Service fees
- Shipping credit refunds
The two expenses above (Amazon Obligated Tax and Regulatory Fee Withheld plus Product, shipping, gift wrap taxes and regulatory fee refunded) exactly negate the Product, shipping, gift wrap taxes and regulatory fee collected that Amazon reports as income on your 1099-K, so you don't pay any tax on these.
We sell only by FBA; if you also sell by FBM your Summary Report may list different items (positive and negative) to include as expenses in QuickBooks.
I'd recommend finding a trustworthy CPA to handle this the first time, and then doing the work yourself from then on if you feel comfortable doing so.
Steve_Amazon
Hi @Seller_L1oyKNy1kKLY6,
Steve from Amazon here, thank you for the post. While I am unable to provide specific tax advice, I have provided several resources below with more information on Amazon tax guidelines.
State Tax Registration Numbers
After review, if your question is still unanswered, I recommend that you create a case to Seller Support with your question and they can engage the Tax department.
Thanks,
Steve
How to handle sales tax reported on 1099 K for tax purposes?
Sales tax reported on 1099 K is throwing me for a loop. How is it handled on taxes? I should not be taxed on sales tax as income.
How to handle sales tax reported on 1099 K for tax purposes?
Sales tax reported on 1099 K is throwing me for a loop. How is it handled on taxes? I should not be taxed on sales tax as income.
How to handle sales tax reported on 1099 K for tax purposes?
Sales tax reported on 1099 K is throwing me for a loop. How is it handled on taxes? I should not be taxed on sales tax as income.
9 replies
9 replies
Seller_Hi7wbO2Kbo6bl
Ignored.
That form is for income tax purposes.
Sales tax is not income -- or if you report it, then it needs to be backed out because none of the money is ever in your possession -- just bookkeeping smoke and mirrors.
Seller_nRFmxiQg4EGrw
The sales taxes collected are reported as part of the 1099K, and are listed on page two (AFAIK, only Amazon does this).
After entering the amount of your 1099K on Schedule C, you enter various deductions, such as shipping costs, COGS, refunds, selling and other fees, etc., as well as things like mileage, home office deduction, supplies, and so on. This is also where you can enter the taxes that were collected and reported on the 1099K; the IRS does not have a line to specify that, but there are blank lines where you can write in a deduction; such as "Marketplace Facilitator Sales Tax Collected".
Seller_nRFmxiQg4EGrw
Yes, the 1099K is for income tax purposes, but be aware that the amount reported includes all the sales tax that was collected.
Seller_xo4Akj7FBBnfC
As stated on the 1099-K Information page, the box 1a 'Gross amount' reported to the IRS is the total of the following values, some of which you might not expect to see reported as income:
- Product sales (non-FBA)
- FBA product sales
- Shipping credits
- Gift wrap credits
- Promotional rebates (typically negative)
- Product, shipping, gift wrap taxes and regulatory fee collected
In the Seller Central Reports Repository, we download the full-year Date Range Summary Report and include all of the above items as income in QuickBooks to (very nearly) match the 1099-K.
Amazon always has a slight discrepancy (typically less than 0.1%) between the total of these items in its Summary Report and the 1099-K box 1a; other sellers have suggested that this is because Amazon uses an inconsistent mix of cash and accrual accounting methods in its Summary Report and 1099-K.
Some sellers adjust their books to show an exact match with the 1099-K, but we prefer to submit to the IRS the amounts in the Summary Report so that we can show that report in the event of an IRS audit.
We include following values (positive and negative) from the full-year Summary Report as expenses in QuickBooks:
- Adjustments
- Cost of Advertising
- FBA inventory credit (typically positive)
- FBA inventory and inbound service fees
- FBA product sale refunds
- FBA selling fees
- FBA transaction fee refunds (typically positive)
- FBA transaction fees
- Amazon Obligated Tax and Regulatory Fee Withheld
- Product, shipping, gift wrap taxes and regulatory fee refunded
- Promotional rebate refunds (typically positive)
- Refund administration fees
- Selling fee refunds (typically positive)
- Service fees
- Shipping credit refunds
The two expenses above (Amazon Obligated Tax and Regulatory Fee Withheld plus Product, shipping, gift wrap taxes and regulatory fee refunded) exactly negate the Product, shipping, gift wrap taxes and regulatory fee collected that Amazon reports as income on your 1099-K, so you don't pay any tax on these.
We sell only by FBA; if you also sell by FBM your Summary Report may list different items (positive and negative) to include as expenses in QuickBooks.
I'd recommend finding a trustworthy CPA to handle this the first time, and then doing the work yourself from then on if you feel comfortable doing so.
Steve_Amazon
Hi @Seller_L1oyKNy1kKLY6,
Steve from Amazon here, thank you for the post. While I am unable to provide specific tax advice, I have provided several resources below with more information on Amazon tax guidelines.
State Tax Registration Numbers
After review, if your question is still unanswered, I recommend that you create a case to Seller Support with your question and they can engage the Tax department.
Thanks,
Steve
Seller_Hi7wbO2Kbo6bl
Ignored.
That form is for income tax purposes.
Sales tax is not income -- or if you report it, then it needs to be backed out because none of the money is ever in your possession -- just bookkeeping smoke and mirrors.
Seller_Hi7wbO2Kbo6bl
Ignored.
That form is for income tax purposes.
Sales tax is not income -- or if you report it, then it needs to be backed out because none of the money is ever in your possession -- just bookkeeping smoke and mirrors.
Seller_nRFmxiQg4EGrw
The sales taxes collected are reported as part of the 1099K, and are listed on page two (AFAIK, only Amazon does this).
After entering the amount of your 1099K on Schedule C, you enter various deductions, such as shipping costs, COGS, refunds, selling and other fees, etc., as well as things like mileage, home office deduction, supplies, and so on. This is also where you can enter the taxes that were collected and reported on the 1099K; the IRS does not have a line to specify that, but there are blank lines where you can write in a deduction; such as "Marketplace Facilitator Sales Tax Collected".
Seller_nRFmxiQg4EGrw
The sales taxes collected are reported as part of the 1099K, and are listed on page two (AFAIK, only Amazon does this).
After entering the amount of your 1099K on Schedule C, you enter various deductions, such as shipping costs, COGS, refunds, selling and other fees, etc., as well as things like mileage, home office deduction, supplies, and so on. This is also where you can enter the taxes that were collected and reported on the 1099K; the IRS does not have a line to specify that, but there are blank lines where you can write in a deduction; such as "Marketplace Facilitator Sales Tax Collected".
Seller_nRFmxiQg4EGrw
Yes, the 1099K is for income tax purposes, but be aware that the amount reported includes all the sales tax that was collected.
Seller_nRFmxiQg4EGrw
Yes, the 1099K is for income tax purposes, but be aware that the amount reported includes all the sales tax that was collected.
Seller_xo4Akj7FBBnfC
As stated on the 1099-K Information page, the box 1a 'Gross amount' reported to the IRS is the total of the following values, some of which you might not expect to see reported as income:
- Product sales (non-FBA)
- FBA product sales
- Shipping credits
- Gift wrap credits
- Promotional rebates (typically negative)
- Product, shipping, gift wrap taxes and regulatory fee collected
In the Seller Central Reports Repository, we download the full-year Date Range Summary Report and include all of the above items as income in QuickBooks to (very nearly) match the 1099-K.
Amazon always has a slight discrepancy (typically less than 0.1%) between the total of these items in its Summary Report and the 1099-K box 1a; other sellers have suggested that this is because Amazon uses an inconsistent mix of cash and accrual accounting methods in its Summary Report and 1099-K.
Some sellers adjust their books to show an exact match with the 1099-K, but we prefer to submit to the IRS the amounts in the Summary Report so that we can show that report in the event of an IRS audit.
We include following values (positive and negative) from the full-year Summary Report as expenses in QuickBooks:
- Adjustments
- Cost of Advertising
- FBA inventory credit (typically positive)
- FBA inventory and inbound service fees
- FBA product sale refunds
- FBA selling fees
- FBA transaction fee refunds (typically positive)
- FBA transaction fees
- Amazon Obligated Tax and Regulatory Fee Withheld
- Product, shipping, gift wrap taxes and regulatory fee refunded
- Promotional rebate refunds (typically positive)
- Refund administration fees
- Selling fee refunds (typically positive)
- Service fees
- Shipping credit refunds
The two expenses above (Amazon Obligated Tax and Regulatory Fee Withheld plus Product, shipping, gift wrap taxes and regulatory fee refunded) exactly negate the Product, shipping, gift wrap taxes and regulatory fee collected that Amazon reports as income on your 1099-K, so you don't pay any tax on these.
We sell only by FBA; if you also sell by FBM your Summary Report may list different items (positive and negative) to include as expenses in QuickBooks.
I'd recommend finding a trustworthy CPA to handle this the first time, and then doing the work yourself from then on if you feel comfortable doing so.
Seller_xo4Akj7FBBnfC
As stated on the 1099-K Information page, the box 1a 'Gross amount' reported to the IRS is the total of the following values, some of which you might not expect to see reported as income:
- Product sales (non-FBA)
- FBA product sales
- Shipping credits
- Gift wrap credits
- Promotional rebates (typically negative)
- Product, shipping, gift wrap taxes and regulatory fee collected
In the Seller Central Reports Repository, we download the full-year Date Range Summary Report and include all of the above items as income in QuickBooks to (very nearly) match the 1099-K.
Amazon always has a slight discrepancy (typically less than 0.1%) between the total of these items in its Summary Report and the 1099-K box 1a; other sellers have suggested that this is because Amazon uses an inconsistent mix of cash and accrual accounting methods in its Summary Report and 1099-K.
Some sellers adjust their books to show an exact match with the 1099-K, but we prefer to submit to the IRS the amounts in the Summary Report so that we can show that report in the event of an IRS audit.
We include following values (positive and negative) from the full-year Summary Report as expenses in QuickBooks:
- Adjustments
- Cost of Advertising
- FBA inventory credit (typically positive)
- FBA inventory and inbound service fees
- FBA product sale refunds
- FBA selling fees
- FBA transaction fee refunds (typically positive)
- FBA transaction fees
- Amazon Obligated Tax and Regulatory Fee Withheld
- Product, shipping, gift wrap taxes and regulatory fee refunded
- Promotional rebate refunds (typically positive)
- Refund administration fees
- Selling fee refunds (typically positive)
- Service fees
- Shipping credit refunds
The two expenses above (Amazon Obligated Tax and Regulatory Fee Withheld plus Product, shipping, gift wrap taxes and regulatory fee refunded) exactly negate the Product, shipping, gift wrap taxes and regulatory fee collected that Amazon reports as income on your 1099-K, so you don't pay any tax on these.
We sell only by FBA; if you also sell by FBM your Summary Report may list different items (positive and negative) to include as expenses in QuickBooks.
I'd recommend finding a trustworthy CPA to handle this the first time, and then doing the work yourself from then on if you feel comfortable doing so.
Steve_Amazon
Hi @Seller_L1oyKNy1kKLY6,
Steve from Amazon here, thank you for the post. While I am unable to provide specific tax advice, I have provided several resources below with more information on Amazon tax guidelines.
State Tax Registration Numbers
After review, if your question is still unanswered, I recommend that you create a case to Seller Support with your question and they can engage the Tax department.
Thanks,
Steve
Steve_Amazon
Hi @Seller_L1oyKNy1kKLY6,
Steve from Amazon here, thank you for the post. While I am unable to provide specific tax advice, I have provided several resources below with more information on Amazon tax guidelines.
State Tax Registration Numbers
After review, if your question is still unanswered, I recommend that you create a case to Seller Support with your question and they can engage the Tax department.
Thanks,
Steve
