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2 Questions: SALES TAX COLLECTED and GROUPON SALES Does

2 Questions: SALES TAX COLLECTED...
2 Questions: SALES TAX COLLECTED and GROUPON SALESDoes Sales tax get reported on the Corporate Tax Return (1120) as part of Gross Receipts or Sales?I just got an IRS bill because I did not include Sales Tax in Gross Receipts or sales, they got a bunch of 1099K forms and added them up. The total was lower than my Line 1a because credit card receipts include sales tax.I also reported net receipts from Groupon instead of gross receipts which I never even see. Should I report Gross Groupon sales and then treat the 40% they keep as some kind of an expense?I would like to have some sort of IRS language that explains this since I have to send a response.
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10/6/2017
Tax.appeal.168
Tax.appeal.168, Tax Accountant
Category: Tax
Satisfied Customers: 4,196
Experience: 3+ decades of varied tax industry exp. Tax Biz owner
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Hello. Thank you for choosing this Q&A Service for assistance. My name is Angela. I will be assisting you.

Q1: Does Sales tax get reported on the Corporate Tax Return (1120) as part of Gross Receipts or Sales?

A1: Based on the Form 1120 instructions, all income from business transactions is supposed to be listed under gross receipts or sales except for amounts reported on lines 4-10. SEE BELOW:

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Line 1a. Gross receipts or sales. Enter on line 1a gross receipts or sales from all business operations, except for amounts that must be reported on lines 4 through 10.

REFERENCE SOURCE:

https://www.irs.gov/pub/irs-pdf/i1120.pdf

Page 8 of the instructions

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Line 17 of the Form 1120 is where you would enter the sales tax amount that was included in the gross receipts. Lines 12-29 of the Form 1120 are deductions. Any amounts entered here reduces the taxable income. Now while your business may pay several different types of taxes and have different license fees, be sure to separate the amounts on Line 17 by a statement. Example, $$$ sales tax which was included in gross income.

-----------------------------------

I am getting the information together for your question number 2. I will get back to you shortly with that answer.

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Hello again.

Q2: I also reported net receipts from Groupon instead of gross receipts which I never even see. Should I report Gross Groupon sales and then treat the 40% they keep as some kind of an expense?

A2: You enter your gross receipts and then you deduct the 40% on Line 26 as Other Deductions. As stated on the form, add a statement as to what that amount represents, example 40% commission paid to .....

If the above information clarifies matters for you, I ask that you please take the time to scroll to the top of the page and select 3 or more stars to positively rate my response so that I can receive credit for assisting you. A 5 star rating is greatly appreciated. Thank you in advance.

Tax.appeal.168
Tax.appeal.168, Tax Accountant
Category: Tax
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Customer reply replied 4 months ago
Thank you for the remarkably prompt response.

You are very welcome. Thank you for the positive rating and the kind words. I appreciate all.

Additional Info for confirmation purposes:

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Where to Show These Expenses on Your Business Tax Return

  • For sole proprietors and single-member LLCs, commissions and fees are totaled on the "Expenses" section of Schedule C
  • For partnerships and multiple-member LLCs, commissions and fees are totaled in the "Deductions" section of Form 1065
  • For corporations, commissions and fees are totaled on the "Deductions" section of Form 1120.

REFERENCE SOURCE:

https://www.thebalance.com/paying-and-deducting-commissions-to-employees-and-others-398951

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Customer reply replied 4 months ago
I was wondering if an amended return would be necessary since Line 1a (Income) increases up by the same cumulative amount that lines 17 and 26 (expenses) increase. There is no effect on Taxable income.

Hello again. You mentioned in your initial inquiry that you rec'd a bill from the IRS because you did not include the sales tax in the gross receipts. Even though the taxable income is not affected, my suggestion is that since you rec'd a bill from the IRS, amend the return just so that everything will be as it should. In addition, amending the return, may have an affect on the amount that they are saying that you owe.

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