Reports: US dispensaries: Reporting your income with form 1099-K

Practitioners

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

 

In this article:

Form 1099-K eligibility
Receiving your 1099-K from Fullscript
Important figures in your financial reports
1099-K export report
1099-K amount reconciliation 
Sales tax
Frequently Asked Questions

 

Note: Our Customer Success team is available to answer any questions surrounding available reports, but we can't provide extensive tax advice. Questions relating to how your taxes should be filed should be directed to your tax professional.

 

Form 1099-K eligibility

Only dispensaries that have satisfied their state's eligibility thresholds will be issued a 1099-K. We refer to the financial address on your account when determining eligibility. 

Tip! Your address was first collected when the dispensary was created! You can edit this address in your account from the Tax page at any time. 

 

Lower threshold states

If you're located in DC, Maryland, Massachusetts, Mississippi, Vermont, or Virginia, you will be issued a 1099-K if $600 or more in sales (i.e., gross payments) were transacted through your dispensary during the calendar year.

If located in New Jersey or Illinois, you will be issued a 1099-K if you have $1000 or more in sales during the calendar year.

In Missouri, you will be issued a 1099-K if you have $1200 or more in sales during the calendar year.

In Arkansas, you will be issued a 1099-K if you have $2500 or more in sales during the calendar year.

Tip! Didn't meet 1099-K eligibility requirements this year? See US dispensaries: Reporting your income for reporting income without this form. 

 

All other states

In all other states, we're required to issue form 1099-K if you meet both eligibility criteria below:

• You had $20,000 USD in sales (i.e., gross payments) during the calendar year, AND
• You received 200 or more payments (i.e., transactions) during the calendar year.

 

Receiving your 1099-K from Fullscript

If you're eligible for Form 1099-K, we issue the form based on your tax information provided in Dispensary Settings. A physical copy will be mailed to the address listed here. We recommend keeping this information up to date to avoid potential delays receiving your 1099-K. 

The Tax tab within an account holder's Dispensary Settings.

Note: Near 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 is correct. 

 

Important figures in your financial reports 

Gross amount transacted (1099-K amount)

This is your 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. You do not pay tax on this gross amount; taxes are calculated from your taxable income amount. 

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.”

 

Sales Total

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

Warning! The Sales Total from the Account activity and balance report will differ from the gross amount transacted (box 1a) on your 1099-K as the gross amount transacted must include expenses. 

 

Net income

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.

Note: The net income figures between these two reports may differ slightly. Learn more. 

 

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 taxable income figure and respective 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.

 

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 itself but does state your gross amount transacted (1099-K amount) and reconciles this gross amount to get to your net income. 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 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.

Note: This export will not be available until the January following the current tax year, once 1099-Ks have been issued.

 

1099-K amount reconciliation 

Beneath the transactions in your 1099-K export report is a reconciliation of your 1099-K amount to your net income. Useful definitions for the figures in these reconciliations have been provided in the table below. 

An example reconciliation of your 1099-K amount found at the bottom of the 1099-K Export report. 

 

Column/term	Definition	Reconciliation identifier (above)
1099-K amount	Gross dollar amount of payment card transactions for the tax year.	A
Fullscript fees	These are the fees charged by Fullscript and can be used as expenses on your tax return to calculate net income.	B
Gross income	1099-K amount (A) less Fullscript Fees (B).	C
Refunded payments	Amounts refunded.	D
FS fees refunded	Fullscript fees refunded in association with refunded payments.	E
Refunded income	Refunded payments (D) less Fullscript fees refunded (E).	F
Net income	Gross income (C) less refunded income (F).	G

 

Account activity and balance report 

The 1099-K Expre 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, then select Excel to download a formatted version of the report.

Downloading the Account activity and balance report from Reports.

Note: There are two versions of the Account activity and balance report. This report was updated in 2020 to improve accuracy and general navigation resulting in two versions of this report: historical and current (2020 and later). We did not overwrite previous years to avoid possible discrepancies in customer records. This applies to dispensaries created in 2020 or earlier. Learn more.

 

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

In this section:

Why did I receive a 1099-K?
Why is my Fullscript 1099-K reporting a number higher than what I actually earned?
What do I need to share with my tax professional to complete my taxes?
Why don't the net income amounts on the 1099-K export and the Account activity and balance reports match?
Which net income figure do I report on my taxes: 1099-K export report net income, or the AABR net income? 
Why am I receiving a 1099-K and not a 1099-Misc?

 

Why did I receive a 1099-K?

If your gross amount transacted met your state's eligibility threshold, Fullscript is required to mail you a 1099-K.

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. 

Tip! Visit the IRS website for other resources such as Understanding your form 1099-K and General FAQs on Payment Card and Third Party Network Transactions.

 

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

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*
  • Shipping charges
  • Sales Taxes
• Cost of sales/goods
• 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.

 

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

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

✔ 1099-K export report

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

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. 

 

Why don't the net income amounts on the 1099-K export and Account activity and balance reports match?

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 12/31/2020 and ships 1/3/2021:

• 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.

Note: The same applies to refunds and other adjustments spanning multiple reporting years.

 

Which net income figure do I report on my taxes: 1099-K export report net income, or the AABR net income? 

Practitioners need to consider their use of cash or accrual accounting in determining what their appropriate taxable income will be in a given year. It's suggested that practitioners use the 1099-K export report in conjunction with other reports, such as the AABR and payouts, to determine how they should report their net income for tax purposes.

 

Why am I receiving a 1099-K and not 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.