Hi,

I have a client with a 1099-K that includes sales taxes collected. Should Line 1 (gross receipts or sales) on my client's business return match the 1099-K or should I subtract the sales tax from the 1099-K to get to the client's true sales amount?

I have seen two different answers to the same question regarding how businesses 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 receipts even though it shows up on the 1099-K. The other response recommended that we should include sales tax in the gross income to match the amount on the 1099-K and then list the sales tax amount under the Tax & License expense category. Which is the correct way to proceed: 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 category? Are there any articles or instructions from the IRS about this?