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kicklaw40
kicklaw40, Attorney
Category: Business Law
Satisfied Customers: 21
Experience:  I am an attorney who has handled matters relating to small businesses in my general practice for 14 years.
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My business will be via internet. If I sell an item for $5.00

Resolved Question:

My business will be via internet. If I sell an item for $5.00 and the buyer pays thru paypal
and my share is $2.50 and a sales associate (salesperson) gets his or her share of $2.50
via paypal. Since I never received the $5.00 can I under the IRS code be taxable only on
my share of $2.50? Do I send the sales associate a 1099 or how does it work. Is it the
responsibility of the sales associate to report that income to the IRS as on an honor
system? What is the code number if applicable.
Submitted: 2 years ago.
Category: Business Law
Expert:  kicklaw40 replied 2 years ago.

kicklaw40 :

Hi ~ I am an attorney and would like to help you with your question.

kicklaw40 :

Is the salesperson an employee of your business?

kicklaw40 :

I would like to help you with your question; are you still there?

Customer:

Not an employee. Commission sales only.

Customer:

The $2.50 could go to help someone fund raise for medical reasons etc via

Customer:

face book etc

kicklaw40 :

Please give me more information about what you are referring to as far as raising money for medical expenses.

kicklaw40 :

Okay - assuming the person is truly not an employee, I would recommend having a written contract with the person that sets forth that they are not an actual employee. In this case, you will issue them a 1099 at the end of the year and they will be responsible for paying their own taxes. To use the numbers in your example, you will show $5 income for the business on a Schedule C of your tax return and will have an expense for $2.50 on Part II, Line 10 of the tax schedule. This will allow you toessentially have a $2.50 write off so that you will be taxed only on the $2.50 that you kept in the transaction.

kicklaw40 :

They will have a 1099 that shows $2.50 of earned income.

kicklaw40 :

I think I understand what you were referring to about the medical expenses now and I think the above information I gave you addresses how you will not be taxed on that $2.50 that goes to the salesperson.

kicklaw40 :

Please let me know if you have any other questions regarding this issue.

kicklaw40, Attorney
Category: Business Law
Satisfied Customers: 21
Experience: I am an attorney who has handled matters relating to small businesses in my general practice for 14 years.
kicklaw40 and other Business Law Specialists are ready to help you
Expert:  kicklaw40 replied 2 years ago.
Our chat has ended, but you can still continue to ask me questions here until you are satisfied with your answer. Come back to this page to view our conversation and any other new information.

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Customer: replied 2 years ago.
The item for sale is a novelty type item. To be more on my question, I mostly
plan to market this item in sort of collaboration with someone or organization
that needs to raise funds for medical type needs for example a child needs funds
to get medical treatment or clubs that need money to travel etc but they will do
their own soliciting via facebook, twitter and other internet means. For each item
sold $5.00 will be paid to paypal and paypal will deposit $2.50 into their account
then they in turn will withdraw their funds. Does this still require a 1099 or will
paypal issue it.
Customer: replied 2 years ago.
I got the info from paypal. This closes out my question.

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I am an attorney who has handled matters relating to small businesses in my general practice for 14 years.