Yes, the 1099-K includes all sales tax that was collected from your customers. The gross sales figure shown on your 1099-K represents the total amount received, including the sales tax portions.

This is a crucial detail because when calculating your actual taxable income on Schedule C, you must subtract the sales tax amount. Since sales tax is money you collected on behalf of states and never actually earned as income, you need to deduct it as an expense or adjustment. Failing to do so means you’ll be paying income tax on money that was simply passed through your business to state tax authorities.