IRS Reveals Final Version of New Reporting Compliance Device for On-Line Retailers (the 1099-K)
- Sales and Use Tax
- March 15, 2010 | Avalara
Whoa, as far as we know the IRS is not in the sales tax collection business, yet...
But starting in 2011, the Service will provide sales tax compliance auditors another tool by which gross sales may be verified.
Credit card processors and electronic commerce payment services like PayPal will begin to report to the IRS and retailers the gross receipts received on behalf of any retailer for a given period.
All merchants who accept payments through credit cards, debit cards, gift cards and PayPal will receive information returns telling them - and the IRS - the gross amount of the merchant card transactions. This will be broken down month by month.
From the IRS release:
""Time and time again, we have seen that better information reporting helps the tax system work better by ensuring that everyone pays what they owe,” said IRS Commissioner Doug Shulman. “The new law gives us an important new tool for closing the tax gap and also provides business taxpayers better documentation to compute and report their income and expenses. The IRS will work closely with stakeholder groups to ensure a smooth implementation of this new program.""
Remember, don't lose sight of the fact that the informational forms do not directly affect sales tax collection or remittance; however, the gross sales reported to retailers will require reconciliation with sales taxes actually collected and, especially for on-line retailers, will provide a fairly comprehensive reporting of gross retail sales independent of a retailer's own records.