An IRS tax form issued by payment processors and marketplace facilitators to report gross payment transactions exceeding the federal threshold. Sellers must reconcile this form against their own records at tax time.
Understanding 1099-K
The 1099-K is an IRS information return filed by payment settlement entities (like PayPal, Stripe, and Square) and third-party network transaction facilitators (like Amazon, eBay, and Etsy) to report the gross amount of payment transactions processed on behalf of sellers.
As of the current federal threshold, these entities must issue a 1099-K to any seller who receives over $600 in gross payments during the calendar year. This is a significant reduction from the previous threshold of $20,000 and 200 transactions, meaning most ecommerce sellers now receive multiple 1099-K forms.
Critically, the 1099-K reports gross transaction amounts — not net income. It includes refunded orders, shipping charges collected, sales tax collected, and marketplace fees that were deducted before payout. Sellers must reconcile these gross amounts against their actual books to avoid overpaying taxes.
Why It Matters for Ecommerce
The IRS receives copies of every 1099-K issued, so the amounts must reconcile with what you report on your tax return. Since 1099-K amounts are gross (before fees and refunds), failing to properly account for deductions means you could be taxed on revenue you never actually received. Multi-channel sellers may receive 5-10 separate 1099-K forms that need to be consolidated.
Practical Example
Amazon issues you a 1099-K showing $120,000 in gross transactions. But your actual Amazon deposits totaled $96,000 because $18,000 went to fees and $6,000 to refunds. On your tax return, you report $120,000 in gross receipts (matching the 1099-K) and then deduct the $18,000 in fees and $6,000 in refunds as business expenses to arrive at $96,000 net.
Related Terms
Sales Tax
A consumption tax imposed by state or local governments on the sale of goods and services, collected by the seller at the point of sale and remitted to the taxing authority.
EcommerceMarketplace Facilitator Tax
State tax laws that require the marketplace (e.g., Amazon, Etsy, eBay) — not the individual seller — to collect and remit sales tax on transactions. Now enacted in most US states.
EcommerceSettlement Report
A periodic report from a marketplace or payment processor that summarizes all transactions, fees, refunds, and the net amount deposited into a seller's bank account.
Put This Knowledge Into Practice
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