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1099 Guidance

TIA – Issuance of 1099s


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 (http://www.irs.gov/pub/irs-wd/9932048.pdf) 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.

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.

If you have any questions please contact Chris Burroughs at (703) 299-5705 or burroughs@tianet.org or Nancy O’Liddy at (703) 299-5711 or oliddy@tianet.org .