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Posted by scott s. on February 1, 2008, 8:48 am
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I own a hotel unit which is operated by a management company as part
of a "hotel rental pool". Typically the company runs its accounting
reports around the 15th of the month for the prior month and cuts
a check for my net after expenses around the 20th. This check also
includes the applicable sales taxes paid by the customers. A new
management company was hired in 2007. I just got my 1099 from them,
and they show my block 1 rental income as including Dec 07, which I
don't receive until Jan 08. In addition, they included the sales tax.
I am a cash-basis taxpayer. Now, I can deal with this I guess, but
because of the change in management and accounting, I will have to show
13 months income for 2007 (the previous company just showed the amounts
when credited/paid, so I have a second 1099 from them for Dec 06 paid
in Jan 07). In my books I have a liability acct for the sales tax,
each month I debit my checking acct and credit the tax liabilty
acct. When I make my tax returns to the state I cut the check which
zeros out my liability. If I accept the 1099 as written, I would have
to treat the tax as income instead and then expense the payment, which
doesn't seem right. If anything, I could see the sales tax as nominee
income, and while the idea of giving a 1099 to the state sounds
appealing, I guess I can't really do that!
I have a call in to the accounting dept to get an explanation, but
I am wondering what anyone thinks of this method of figuring the
1099. Is there any reference/citation I could look up? I did
some self help, and the regulations 1.6041-1(h) when payment
deemed made, suggests to this layman that payments made in 2008 should
not be reported in 2007. I couldn't find anything specific on
sales tax collected, but under 1.6041-1(a)(1)(i)(B) the
categories of payments includes rents, gains, profits, and income,
and this and some examples suggest that sales taxes forwarded
should not be considered reportable, since the reporting
individual has no interest in the payments of the sales tax.
scott s.
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