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?

[georgio]

I tend to agree with the interpretations that the Sales Tax included in your 1099-K should not be included in income. My CPA (in Pennsylvania) told me the same, that I shouldn't include Sales Tax anywhere in income.

The question is how to do it in Turbotax. I decided to go to Forms View and just reduce the total gross amount on my imported 1099-K. I don't believe this number appears on your taxes anywhere other than as part of your grand total of Income Line 1 on Schedule C, so that seems to be the cleanest way to remove the Sales Tax from the Income total.

I initially checked the box in TT after importing the 1099-K that said the box 1a should be adjusted. But I noticed this showed up at the very top of Schedule 1 under "For 2024, enter the amount reported to you on Form(s) 1099-K that was included in error or for personal items sold at a loss" and that doesn't seem right. It's not an error in the 1099-K.

I also think handling it as an "Other Expense" on Schedule C Line 27a/48 is a viable alternative. Maybe even better as you can describe it as "Sales Tax included on 1099-K". This is how I am handling the Credit Card charges included in 1099-K, on Line 48 with "Credit Card processing fees from Square 1099-K". I might just change to this method before I file as I like that I can include an explanation.

I hope TurboTax will add something in the future that makes it clear what the best way to handle this is.

[njohnson134]

In my situation, I'm not required to collect sales tax for every payment. So now I have to sort all of these transactions, collected vs not collected, per 1099k (i.e.Venmo, Paypal, Stripe), just to find the number I'm excluding from gross receipts. (I'm reconfiguring my sheets to do this automatically for 2025). 

I'm already finding discrepancies between whats reported by month on the 1099k from Venmo, against my own monthlies. There are transactions on my sheets that say I collected sales tax, but are not reflected in the monthly totals for the 1099k. Now I need to go line by line in Venmo to verify. What a mess.  

Then theres still the question of how to correctly report. The fun never ends!

[Vanessa A]

If you are operating a business, the best thing is to keep your own records and do not rely or use the 1099K. If you use something like QuickBooks or a spreadsheet to track your sales, expenses, sales tax, etc., you can just enter the numbers from your records.  You do not need to include the 1099-K on your return. 

[sgerenser]

Vanessa A is right on the money. I originally thought the right approach was to enter the 1099-K and adjust it, but I did not realize that the information you enter into Turbotax regarding the 1099-K only shows up in an "informational" worksheet that is not even transmitted to the IRS (it also flows to Schedule C but it's just aggregated with all other business income). The IRS actually has no way to tell whether the income that ends up on Schedule C was from a 1099-K, or was just amounts that you entered yourself from your records. Since my records are far more accurate and complete than the 1099-K, my solution this year was to ignore the 1099-K and enter all data from my business records. That makes this whole thing much easier!

Presumably, what the IRS is looking for with the 1099-K is people who get one (say, from selling stuff at craft fairs or on eBay) and don't enter it onto their taxes at all. If you're operating a legitimate business with accurate business records and P&L, there's no need to worry about it.