The 1099-NEC shows what was paid to the business. It does not show what was paid "for". If I charge you $500 for materials and $1000 for labor, the 1099-NEC you issue me will be for $1,500. Then I will enter that amount as income because it is "in fact" income that you paid me.
In the expenses section, I will show that I paid $500 for materials and that will be deducted from the $1,500 gross income, leaving me with $1,000 of taxable income. That's how it's always worked. Nothing difficult about it, and there is no double-taxation.
