What Counts on a 1099-NEC: Materials, Sales Tax, Expenses

October 17, 2026 · 2 min read

General information, not tax, legal or financial advice. We are not the IRS. Check IRS.gov or a qualified tax professional. Sources read on October 17, 2026. Dates and amounts after 2026 are expected. Examples use made-up numbers. This page contains no affiliate links.

Short answer: Per the IRS instructions, box 1a includes payment for services, including parts or materials used to perform the services if supplying them was incidental to the service, and a fee or travel reimbursement the nonemployee did not account to you for, if the fee and reimbursement total at least $2,000. Sales tax imposed on the provider and paid to the provider is part of the reportable payment; sales tax imposed on you and collected from you is not.

Include

• Fees and commissions to independent contractors, parts and materials incidental to the service.
• Unaccounted-for travel reimbursements, together with the fee.
• Exchanges of services between businesses: the fair market value of each one's own services (the instructions' attorney and painter example).
• Taxable fringe benefits to non-employees, directors' fees, and certain others listed by the IRS.

Exclude (not reported on 1099-NEC)

• Payments for merchandise, freight, storage and similar items.
• Employee wages, allowances and bonuses (Form W-2).
• Employee business expense reimbursements (do not use Form 1099-NEC).
• Scholarships and fellowship grants, canceled debt (Form 1099-C), rent (1099-MISC), interest (1099-INT).
• Transit passes below a monthly value of $21 to an independent contractor (the instructions say the full value is reportable if more than $21 in a month).

Made-up example

A contractor bills $1,500 for labor and $700 for materials used in the job, all under one invoice. If supplying the materials was incidental to the service, the total of $2,200 is the amount for box 1a (above the $2,000 threshold for 2026 as read).

Related

Who gets a 1099-NEC · Exceptions

FAQ

Does a well-documented expense account change the result?

The instructions refer to reimbursements "for which the nonemployee did not account"; accountable treatment is not covered in detail here.

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