Reports: US Dispensaries: Reporting Your Income With Form 1099-K

While we are unable to provide extensive tax advice to our practitioners, we want to do our best to ease the stress come tax season as much as possible. This article will guide those who qualify for Form 1099-K to the necessary reports to complete your tax requirements as painlessly as possible. We suggest referring to US Businesses: Reporting Your Income for Tax Purposes if you did not qualify for a 1099-K during the tax year.

 

In this article:

Eligibility to Receive Form 1099-K
State Exceptions to 1099-K Eligibility (MA & VT)
Receiving Your 1099-K from Fullscript
Understanding Important Figures in your Financial Reports
How to Report Your Income with Form 1099-K
1099-K Reconciliation Report
Sales Tax
Frequently Asked Questions

 

Note: Our Customer Success team is available to answer any questions surrounding available reports, but are unable to provide extensive tax advice. Questions relating to how your taxes should be filed should be directed to a tax professional.

 

Eligibility to Receive Form 1099-K

We are required to issue a 1099-K form to you and the IRS if you meet both of the eligibility criteria below:

• You had $20,000 USD in sales during the calendar year AND
• You received 200 or more payments during the calendar year

 

State Exceptions to 1099-K Eligibility (MA & VT)

If you are located in Massachusetts or Vermont, you will receive a 1099-K form if you have $600 or more in sales (enforced by the State) OR if you meet the criteria above (enforced by the IRS).

Your sales information will also be reported to the IRS as well as the state tax authorities for Massachusetts and Vermont. You will still only receive one 1099-K form from Fullscript if you qualify based on state and IRS requirements.

Tip! If you are not eligible to receive a 1099-K, please see US Businesses: Reporting Your Income for guidance on completing your taxes.

 

Receiving Your 1099-K from Fullscript

Should you qualify to receive a 1099-K, Fullscript will issue the form based on the information provided in your Dispensary Settings under Tax as shown below.

 

 

Note: At the end of the tax year, we may reach out to some account holders to request missing information or confirm the information we have on file. This is required to ensure the 1099-K is issued correctly and sent to the correct address.

 

Understanding Important Figures in your Financial Reports

Sales Total

As mentioned above, Sales Total represents the total retail value of orders transacted. This means only pricing and cost of goods associated to products sold through your dispensary are recorded in Financial Reports. Expenses such as shipping fees and sales tax are not included in this total.

 

Gross Amount Transacted (Displayed in Form 1099-K)

This is your sales total with expenses included. Fullscript is required to report the gross amount transacted through your account to the IRS once you’ve met the threshold requirements. Your gross amount transacted for Fullscript payments will appear on the 1099-K form.

Fullscript is required to report your gross amount transacted from your Fullscript account on the 1099-K form without subtracting expenses.

The IRS also states that gross amount means, “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.”

Warning: The Sales Total, from the Account Activity and Balance Report, will differ from your 1099-K gross sales total (box 1a) since the gross amount must include the expenses presented earlier.

 

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 tax records to determine your correct tax.

Tip! You can use the fees charged by Fullscript as your cost of sales and report them as a business expense on the appropriate line item of Schedules C, E and F.

 

Net Profit

Net profit is your gross transacted amount minus your expenses.

 

How to Report Your Income with Form 1099-K

The 1099-K Reconciliation Report is a listing of each sale by order number that includes the gross amount of the transaction, less Fullscript fees charged and refunds issued, and the resulting net income. This report can be used in conjunction with the Account Activity and Balance report to determine your proper earnings for tax purposes.

Your reported earnings should match the Net Income provided in both your Account Activity and Balance Report, and in the 1099-K Reconciliation Report (soon to be available in Reports). For an example of how Net Income is calculated using the Account Activity and Balance Report, please see US Businesses: Reporting your Income.

 

1099-K Reconciliation Report

Refer to your 1099-K reconciliation report (available late January/February) to reconcile the 1099-K issued for your Fullscript sales. This report will list each sale by order number and include the following information:

1099-K Amount: Order total amount charged to the buyer and included on the 1099-K form issued by Fullscript.

Fullscript Fees: These are the fees charged by Fullscript and should be used as expenses when calculating Net income.

Gross Income: 1099-K amount minus the Fullscript Fees.

Refunded payments: Amounts refunded.

Fullscript fees refunded: Fullscript fees refunded in association with refunded payments.

Refunded Income: Refunded payments minus Fullscript fees refunded.

Net Income: Gross Income minus refunded income.

 

Sales Tax

Fullscript collects and remits applicable sales tax to the state for you, so you have one less thing to worry about.

 

Frequently Asked Questions

Why did I receive a 1099-K?

If your gross amount transacted was greater than $20,000 and 200 transaction, Fullscript will send you a 1099-K. If you are to receive this form, you will be notified via email that the 1099-K is on its way and you may also contact us to receive a PDF copy.

One exception exists for our practitioner’s located in Massachusetts and Vermont, who will receive a 1099-K if total sales exceeds $600 USD

 

Why is my Fullscript 1099-K reporting a number higher than what I actually earned?

Don’t worry, this is normal, and the IRS instructions for this form actually require Fullscript to report the gross amount transacted of payments that we facilitated on your account as opposed to the net earnings.

“Gross Amount Transacted” consists of:

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

*All sales tax and shipping charges are included in the fees charged to you by Fullscript. You will not have to pay taxes on Fullscript’s fees.

Tip! See Understanding Important Figures in your Financial Reports for more information.

 

Why am I receiving a 1099-K and not a 1099-Misc?

Fullscript is legally a Third-Party Settlement Organization, 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.

 

What do I need to share with my tax professional to complete my taxes? 

✔ Account Activity & Balance Report (for appropriate tax year)

✔ 1099-K issued by Fullscript (if qualified)

✔ 1099-K Reconciliation Report

 

Note: Don't forget to verify your tax information before your 1099-K is issued. Contact our Customer Success team if you have any questions.