US dispensaries: Navigating your financial reports and 1099-K for tax purposes

This article is intended for practitioners who received Form 1099-K from Fullscript. We suggest referring to US dispensaries: Reporting your income for tax purposes if you didn’t qualify for this form during the tax year.

Form 1099-K eligibility

We’re required to issue Form 1099-K if you satisfy the eligibility requirements of your state during the calendar year.

Dispensary owners can reach out to our Customer Success team to request a PDF copy of their 1099-K, but keep in mind that 1099-Ks for the current tax year are not issued until January of the following year.

State-specific thresholds

Depending on individual state requirements, you may receive a separate state 1099-K.

Receiving your Form 1099-K

Near the end of the tax year, we may contact account holders to request missing information or confirm the information we have on file is correct. You can review and update your mailing address and other tax information from the Business financials page in your account. We recommend keeping this information current to avoid delays in receiving your 1099-K. 

If you’re eligible for Form 1099-K, your form will be mailed to the mailing address provided (unless you’ve opted for E-delivery) and generated using the tax information we have on file.

Why you receive a 1099-K instead of a 1099-MISC

Fullscript is legally a Third-Party Settlement Organization (TPSO), meaning we facilitate your patient’s orders by administering the transaction and organizing the delivery of products at the price you selected.

Form 1099-K is typically reserved for electronic payments and payments by credit card to contractors. If a company is deemed a payment settlement entity (PSE), it is required to file a 1099-K form.

The TPSO is:

• The establishment of accounts by a significant number of unrelated parties.
• An agreement between the organization and the sellers to settle payment transactions.
• The establishment of standards and mechanisms for settling the transactions.
• The organization’s guarantee that the provider will be paid.

Important figures in your financial reports

Gross amount transacted (1099-K amount)

This is your Fullscript sales total with expenses included. Fullscript is required to report the gross amount transacted through your account to the IRS if you meet the eligibility thresholds in your region. The gross amount is the amount presented on your 1099-K.

The IRS states that the gross amount transacted is “the total unadjusted dollar amount of aggregate payment transactions for each participating payee. This amount is not to be adjusted to account for any fees, refunds, or any other amounts.”

Why your 1099-K amount can be higher than your earnings

Don’t worry, this is normal and required. As per IRS 1099-K instructions, we’re required to report the gross amount of payments transacted on your account as opposed to your net earnings/income.

Gross Amount Transacted consists of:

• Fullscript processing fees*
• Cost of sales/goods
• Refunded charges
• All adjustments (if any)

Sales Total

Sales Total represents the total retail value of orders transacted through the account, excluding expenses. This amount is found in the Account activity and balance report.

Net income

Fullscript net income is your Sales Total less Cost of Sales (Cost of Goods). This figure is calculated in your 1099-K Export and Account activity and balance report.

Expenses

These are the fees charged by Fullscript. Fees include (not a complete list):

• Fullscript processing fees
• Costs of goods
• Shipping charges
• Sales Taxes
• Refunded charges
• All adjustments (if any)

The IRS states that separate reporting of these transactions is not required. However, Form 1099-K can be used in conjunction with your other Fullscript reports and any other tax records related to your business to report your income.

1099-K export report

Those eligible to receive Form 1099-K should refer to the 1099-K Export available in your account on the Reports page. This report lists each sale by order number and applicable amounts, including the dollar amount the order has contributed to your 1099-K amount.

This report doesn’t replace Form 1099-K but does state your gross amount transacted through Fullscript (1099-K amount). We recommend you download and share this report with your tax professional, along with your 1099-K. 

To download this report from your account:

1. Log in to your account and go to Financial reports.
2. Scroll down to the 1099-K Export header.
3. Select the tax year to export the report.

Downloading the 1099-K Export from the Reports page.

Sample 1099-K export report

Account activity and balance report 

The 1099-K Export can be used in conjunction with the Account activity and balance report to determine your proper earnings for tax purposes.

To download the Account activity and balance report:

1. Log in to your account and go to Reports.
2. Scroll down to the Account activity and balance report header.
3. Select a tax year and a format.
4. Click Download to download a formatted version of the report.

What you should give to your tax professional

✔ Form 1099-K issued by Fullscript (if eligible)

✔ 1099-K export report

✔ Account activity & balance report (for the tax year)

Why net income differs between the 1099-K export and AABR

The net income on the 1099-K export report is based on the transaction date, while the account activity and balance report net income is based on order completion (i.e., the date the order shipped). 

The 1099-K amount, as required by the IRS, must reflect the unadjusted dollar amount transacted within the year. For this reason, transactions in this report, and in turn, the resulting net income amount, consist of transactions that were processed within the reporting year (i.e., transaction date).

The account activity and balance report was designed to report all completed transactions processed through an account, where complete reflects the order has been fulfilled (i.e., the ship date).

Due to these timing differences, sales activity spanning multiple reporting years will impact net income across these reports.

For example, an order is placed 12/31/2024 and ships 1/3/2025:

• 1099-K export report: net income is reflected in the 2020 report, the year the order was transacted. 
• AABR: net income is reported in 2021, the year the order shipped.

Sales tax

Fullscript operates as a Marketplace Facilitator whom is required to collect and remit sales tax on behalf of all Marketplace Sellers. Fullscript stores are considered Marketplace sellers.

Fullscript will remit any sales tax collected to the appropriate taxing authorities. Your business may still have sales tax/other tax obligations to fulfill. Your accountant or CPA can assist you in determining what your business obligations are.

To learn more about sales tax with Fullscript, see US dispensary sales tax.