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How do I report transactions with a clearinghouse for tax purposes?

I am planning on setting...
How do I report transactions with a clearinghouse for tax purposes? I am planning on setting up an online registration system, or clearinghouse, where the online program will register and accept payments in full for training offered from various individuals.

I plan to charge a 10% a booking fee. If for an example we book training for an individual and receive the total training fee of $100.00 online, I would be keeping $10.00 and conveying the remaining $90.00 to the individual who will be conducting the training. For tax purposes, do I report only $10.00 as revenue with no expenditures, or do I report $100.00 of revenue with an expenditure of $90.00?
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Answered in 27 minutes by:
9/21/2013
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16,581
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
Verified

Megan C :

Hello! I am a CPA here to assist you with your tax questions. My goal is to provide you with excellent service today.

Megan C :

How are you today?

Megan C :

To report these for tax purposes you will record $100 as revenue, then $90 as cost of goods sold which will leave you with a net income of $10. Only the $10 is taxable, but you want to show how you got there.

Megan C :

This way, if you're audited your revenue matches your deposits.

Customer:

By reporting the full amount as income, I believe we would pay local taxes on the full $100.00 as a business tax. Am I correct about the normal way local taxes are collected, or do they allow for a deduction of "Cost of Goods Sold"?

Megan C :

What state are you in?

Customer:

Virginia

Customer:

Fairfax, Virginia

Megan C :

You would be able to deduct the cost of goods sold for your Virginia state taxes

Customer:

I am thinking local Fairfax County business tax. On their business application they ask for "Gross Sales". Would we have $100 or $10 in gross sales in this example?

Megan C :

Gross sales would be $10 because that is what you sold.

Customer:

Yes, I see this now. Thank you very much for you advise!

Megan C :

You're welcome

Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16,581
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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Bernard

Thanks for your positive rating. Please come back and visit me any time you have a question that needs answered. It was a pleasure working with you today.

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Megan C
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16,581
16,581 Satisfied Customers
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

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