Issuance of 1099s
Avoid Unnecessary State Taxes
Protect your business. Protect your profits.
The attorneys for the Transportation Intermediaries Association (TIA) have examined this particular issue and have some invaluable information for you.
Some states are assessing taxes on 3PL business, even if the company is not domiciled in that particular state. These specific states are evaluating those charges based on 1099s issued to motor carriers.
Issuance of 1099s
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)).
Furthermore, payments made to owner-operators may be excepted as “freight” under Treas. Reg. Section 16041-3(c), but household goods hauled by a moving company are not considered “freight” eligible for the exception. Please note that the freight services exception does not apply to independent sales agents who may be used by members, or to any other types of service providers—these remain subject to the 1099 requirement, although they may be subject to other exceptions depending on the nature of your individual operation.*
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If you have any questions please contact TIA's Government Affairs team at (703) 299-5700 or by e-mail.
*The above is for informational purposes only and is not intended to be legal advice upon which you can rely. Please be advised that not all cases are the same and that you should consult with experienced tax counsel or a CPA about your individual situation.