ETA Expert Insights: Key Takeaways on 1099K for Payment Facilitators & Marketplaces

ETA Payment Facilitator Committee
By Jennifer Maddux, Intuit • Nicole Meisner, Jaffee Raitt Heuer & Weiss • Wendy Walker, Sovos • Andrew Winslow, Sovos

The latest roundtable discussion with ETA’s Payment Facilitator Committee focused on how payment facilitators and marketplaces should approach the 1099K and best practices to consider. 1099-K allow the government to track all online sales done by retailers. The 1099-K form helps the US Government ensure that online retailers are reporting sales for tax purposes. Third-party processors and credit cards are required to report the payment transaction they process on behalf of retailers. There can be many nuances with the 1099K form — depending on where your company is based, depending on where your clients are based, local regulations, and so on. The ETA Payment Facilitator Committee had the opportunity to delve into all issues 1099K with experts. This discussion was led by Jennifer Maddux (Intuit), Wendy Walker (Sovos), Andrew Winslow (Sovos), and Nicole Meisner (Jaffe Law), who provided participants with the following key takeaways:

1. Businesses are required to file Form 1099-K information with the state of the recipients’ residence rather than where the company is doing business. For example, if the company makes a 1099-K reportable payment to a recipient with an address located in Oregon — that same Form 1099-K is required to also be filed with the Oregon Department of Revenue.
2. If you find that you have been reporting on your 1099K forms incorrectly, it is better to change the way you have been doing things rather than report incorrectly again. Switching your method of reporting will raise a flag, so be sure to include a memo on why the changes occurred.
3. The American Rescue Plan changes the threshold to payments totaling more than $600 and could generate $8.4 billion in revenue over a 10-year period.
4. A recent private-letter-ruling by the IRS seems to indicate that the IRS views rental payments paid by a third-party settlement organization over a third-party payment network to be 1099-K reportable (rather than 1099-MISC reportable). PLR-114800-20
5. Each payment facilitator should determine whether it is responsible (either by law or contract) for filing Forms 1099-K with respect to its submerchants.  The law does not apply uniformly to all payment facilitators — it is dependent on the payment facilitator’s role in the transaction with respect to its submerchants and the payment facilitator’s contractual obligations with its sponsor.
6. The gross amount of reportable transactions is the total unadjusted dollar amount of the payment transactions for a participating payee. This means the reportable amount should not be adjusted to deduct any fees, refunds, or other amounts — including chargebacks!

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Interested in joining the committee? Over the past year, we have worked to harness the collective expertise of ETA and its members through our committees to help navigate industrywide opportunities and challenges. In conjunction with ETA’s Payment Facilitator Committee. For example, we released the third edition of the ETA Payment Facilitator Guidelines to help our members mitigate risk in U.S. card acceptance. The revised document includes updates related to COVID-19, ecommerce, privacy, compliance, graduation of submerchants, and enhanced review of certain marketing practices.