My friend is an employee of a dealership A and is paid by them. She does outside sales for dealership A and other dealerships pay dealership A for her sales services as well. Last year she bought some monogrammed cups for another dealership B using her personal credit card. She paid $1109.56 for the cups. Dealership B then gave her a check for $1109.56 for the cups. That is the only payment they made directly to her. Otherwise, they paid the monthly invoice to dealership A for her services. Dealership B has now issued her a 1099 with $1109.56 in Box 7. According to my reading of 6041A, this expense should not be eligible for a 1099 because it was not a payment for services, but a direct payment for goods for which she supplied them the receipt. (*please see below for reference). Is this correct? Is Dealership B correct in issuing a 1099 for this payment? If so, why? Could you please point me to the relevant tax code?

Thanks so much for your help!

*Additional note: I have no idea if this is relevant, but when she paid for the cups, sales tax was included in the amount. Dealership B is now giving away half of the cups as promotional gifts and is also selling half of the cups themselves.

Here's what I was referencing:

2003?26 I.R.B. : https://www.irs.gov/pub/irs-irbs/irb03-26.pdf pg. 1116

"Situation 2. The payment for the purchase of computer equipment is not subject to information reporting under section 6041A because the payment is not for services. The contract is not subject to information reporting under section 6050M because the agency did not enter into a contract obligating an amount exceeding $25,000. Agency X does not have to file either Form 1099?MISC or Form 8596."

Pg. 1115

"Section 6041A(a) provides that if (1) any service-recipient engaged in a trade or business pays in the course of such trade or business during any calendar year remuneration to any person for services performed by such person, and (2) the aggregate of such remuneration paid to such person during such calendar year is $600 or more, then the service-recipient must file a return, according to the forms or regulations prescribed by the Secretary, setting forth the aggregate amount of such payments and the name and address of the recipient of such payments. For purposes of the preceding sentence, the term ?service recipient? means the person for whom the service is performed. This information must be filed on Form 1099?MISC, Miscellaneous Income." **Situation 2 above uses an example to clarify this clause