My 1099K includes sales taxes I collected as part of my business. Should I subtract the sales tax from my gross income even though it will differ from my 1099K?

Forum|Forum|6 years ago
June 1, 2019
2 replies
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I have seen two different answers to the same question on this site regarding how business owners should handle sales taxes collected and paid to the State. One answer recommended that we not include the sales tax we collect in our gross income even though it shows up on the 1099K. The other response recommended that we should include those dollars in the gross income (as indicated on the 1099K form) and then list the sales tax amount under Tax & License expenses. That seems like a great way to avoid reporting a different income than what is shown on the 1099K form, but TurboTax did not list "state sales tax" as an example of appropriate items to be listed in the "Tax & License Expenses" section. Which is the safer way to go: not including sales tax collected in the gross income figure or including sales tax collected in gross income but also listing the amount collected & paid in the Tax & License Expenses section? Thanks for you help!

TurboTax Deluxe Windows

LeeM

Employee

No, you should enter the income as it appears on the 1099-K, as the IRS receives the same information and will look that it matches your return.

You can then enter the sales tax amount under Tax & License expenses.

shannon2Author

Employee

Thank you for the quick response! Just a friendly suggestion: it would have been helpful if TurboTax had listed "sales tax collected and paid" as an example under Tax & License Expenses. That little bit of confirmation would have made it perfectly clear how to handle sales tax. Thanks again!

Doug118

What I did was to report it on the "Enter Business Expenses Not Yet Reported" page. That comes after the "Enter Your Business Expenses" page which has no matching category. I described the expense as "Sales tax collected and reported on 1099-K".

TurboTax should have some way of doing this on the 1099-K page -- i.e. ask you if the "Gross amount of payment card/third party network transactions" includes sales tax, processing fees, or any other non-income item typically reported in box 1a.