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Discussion Forum Index --> Basic Tax Questions --> 1099 that includes sales tax
Discussion Forum Index --> Tax Questions --> 1099 that includes sales tax
Teri (talk|edits) said:
| 26 March 2008
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| My client performs services for her one and only client that are subject to sales tax in the state of Washington. She received a 1099 from the client and the amount in box 7 includes the sales tax. I'm not sure how to report the 1099 in her Schedule C since the amount of revenue she received is actually a few thousand dollars less than the 1099 due to the sales tax. Will this be questioned by the IRS? Do I not report the 1099 but show her revenues less the sales tax on her Schedule C? Thanks for any help.
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Southparkcpa (talk|edits) said:
| 26 March 2008
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| This happens quite often, you should match the 1099 to your clients tax return and show the differecne as COGS. In my financial services business, my 1099 is usually 5 percent higher than my cash because they deduct insurance, dealer fees etc.. so I make a tax only entry crediting revenue and debiting fees to match the 1099.
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KatieJ (talk|edits) said:
| 26 March 2008
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| Considering this is a service business, I'd deduct the sales tax as taxes, not as CGS. But that's a minor point and otherwise I agree with Southpark.
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Teri (talk|edits) said:
| 26 March 2008
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| Perfect! Thanks Southpark & Katie!
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RoyDaleOne (talk|edits) said:
| 26 March 2008
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| For what it is worth I read someplace that the IRS sometimes considers sale tax collected to be a part of gross income, and you get a deduction for sales tax paid.
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Death&Taxes (talk|edits) said:
| 26 March 2008
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| In some states, like PA, the remitter of the Sales Tax gets a discount [PA is 1%] so Roy's method would clearly reflect this.
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