We have heard from many members about states assessing taxes on transactions within those states based on 1099s issued to carriers within those states. Upon review, our attorneys have reported the following:
There is a general exception from the requirement to file I.R.S. 1099 forms for payments made for “freight services.” According to a 1999 IRS ruling, the exception for “freight” has been in existence since 1918. The IRS has consistently interpreted the term “freight” using its plain meaning, “as a method or service for transporting goods or the cost of such transportation.” The interpretation results in a general exception from reporting of payments for truck, rail, ship, and air freight services. Additionally, payments to incorporated trucking companies are excepted from reporting (Internal Revenue Code Section 1.6041-3(c)).
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