Make sense of your eBay 1099-K
Learn exactly how eBay calculates the “gross receipts” amount on your 1099-Ks in this eBay 1099-K guide. We make sense of the numbers so you don’t have to.
Despite the fact that 1099-Ks have been around since 2012, eBay sellers still have difficulty figuring out how to make sense of the numbers on their 1099k. While it may seem odd, there are some very good reasons for this.
What if we told you that:
1. The 1099-K detailed report that eBay provides to explain its 1099-K may sometimes not match the 1099-K?
2. The Transactions report that eBay lets you download may also provide numbers that don’t match the 1099-K they send you?
3. The monthly Financial Statements definitely do not match the 1099-K?
How, then, does an eBay seller figure out how to reconcile all of this? It’s easy – just follow the eBay 1099-K guide below. Let’s start with a 3-step breakdown of what does and doesn’t go into an eBay 1099-K
Things that INCREASE what’s reported on your 1099-K
The following amounts get added together and increase the amount reported on your eBay 1099-K.
- Orders
The sale price of items you sell to a customer - Shipping and handling
The amount of shipping and handling you charge a customer - Orders that are later refunded
The sale price of items in an order that later gets refunded - Shipping and handling that is later refunded
The amount of shipping and handling of an order that later gets refunded
Things that DECREASE what’s reported on your 1099-K
The following amounts get subtracted from other amounts and therefore decrease the amount reported on your eBay 1099-K.
- Price discounts
Any discounts off the sales price of an item - Shipping discounts
Any discounts off shipping and handling
All of the amounts above can be deemed to be “included” in your 1099-K amounts. As in, they affect the amount reported. However, there are a number of additional financial amounts that show up in various eBay (and accounting) reports that are “excluded.” As in, they do not impact the amount reported by eBay.
Amounts that are IGNORED when calculating your 1099-K
The following amounts are not added or subtracted from your 1099-K totals. They are completely excluded.
- Sales tax
Sales tax collected and remitted on your behalf - Refunded orders
The sale price of an item when a refund is issued - Refunded shipping & handling
The amount of shipping and handling of an order when a refund is issued - Orders that later get canceled
The sale price of an item in an order that later gets canceled - Shipping & handling that later gets canceled
The amount of shipping and handling of an order that later gets canceled.
Refunds vs Cancelations
Did you notice that eBay will include the original sale price of an order that eventually gets refunded, but doesn’t subtract out the same amount once it is refunded?
But they choose not to include the original sale price of an order that gets canceled, nor do they subtract out the amount when it is canceled.
While we don’t know the EXACT logic behind this, our guess is that it has to do with the processing of payments (which is also who the 1099-K reporting requirement was originally created for.) If eBay collects money from the buyer, it gets reported as part of the 1099-K. However, if an order is canceled before payment is collected, it does not. And money refunded to the buyer is excluded.
Reconciling different sources
If you look at a few different sources from eBay, you may struggle to figure out what we’ve outlined above.
Price discounts
eBay’s 1099-K detail report DOES NOT reduce the item subtotal amount of an order when a discount exists. In effect, it overstates the gross receipts amount. However, when a shipping discount is provided, they DO reduce the amount.
Shipping discounts
eBay’s transactions report DOES reduce the item subtotal amount of an order when a discount exists. However, when a shipping discount is provided, they DO NOT reduce the amount.
Refunds
Like the 1099-K, eBay’s 1099k detailed report DOES NOT subtract out refunded item prices or shipping and handling. But eBay’s transactions report DOES subtract them out.
Canceled orders
Like the 1099-K, eBay’s 1099k detailed report DOES NOT include or subtract out canceled item prices or shipping and handling. But eBay’s transactions report DOES include them and subtract them out. You will find the original order listed, along with any shipping and handling.
What makes this last one particularly hard to spot is that, if you look under the “Type” column, you will see both refunded and canceled orders show up as “Refund”. But, if you look over in the “Reference ID” columns, you will see cancellations show a value that starts with “Cancel ID”
Comparison
Here’s a simple matrix to show you how different types of orders are handled in different places within eBay (and by Seller Ledger)
It is possible to reconcile all of these numbers with your 1099-K, it’s just a lot of work. That’s why we went through the hassle, so you don’t have to. You’ll notice that the only difference in the totals between your eBay 1099-K amount and Seller Ledger is that Seller Ledger deducts the refunded amounts that are not deducted from the 1099K. This is important because you shouldn’t be paying taxes on sales that later get refunded. Another reminder that the 1099-K is not only an inaccurate representation of your total sales, but also has no information about expenses and other deductions.
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