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Rebate Reporting Rules When You're Not the Direct Seller
September 2, 2026
Q. We pay rebates to many customers who purchase our products through 3rd party distributors. Since we are not the direct seller of the material, is the rebate still considered a "return of capital," or would it be 1099 reportable?
A:
(Answered by IOFM's third-party tax expert)
The IRS has long held that rebates are not taxable income and thus are not reportable on a 1099. While most IRS guidance doesn’t specifically address your exact scenario, Revenue Ruling 76-96 seems similar. In that…
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