IRS Merchant Category Code (MCC) List

The Internal Revenue Service (IRS) has published an optional revenue procedure that allows users of Merchant Category Codes (MCCs) to determine which payment card transactions are reportable to the federal government on IRS Form 1099-MISC (Miscellaneous Income).

Companies and government agencies that use commercial payment products to pay for merchandise and services are required to report payments for services to the IRS. Historically, determining which payments were for services and which were for merchandise was an arduous process and frequently required a review of individual transaction detail. The new IRS revenue procedure and “MCC List” takes the guesswork out of this process by allowing cardholders to determine reportable payments based on the supplier’s MCC.

In general, the revenue procedure classifies businesses by MCC according to whether they predominantly furnish services (for which payments are reportable) or merchandise (for which payments are not reportable). For example, payments to a company that primarily sells computer hardware would not be reportable, whereas payments to a company that primarily performs computer maintenance and repair would be reportable, because the company is providing a service.

The revenue procedure permits companies and government agencies to rely on the MCC List in determining whether a payment card transaction is subject to reporting under section 6041 or section 6041A of the Internal Revenue Code. Although use of the MCC List is optional, it provides a convenient and reliable way to identify reportable transactions and greatly simplifies the annual task of 1099 reporting.

This booklet provides frequently asked questions about the IRS revenue procedure and includes the IRS’ MCC List which may be used to determine which transactions are reportable. For additional information, please consult IRS Revenue Procedure 2004-43, which was published on August 2, 2004 in Internal Revenue Bulletin 2004-31 and is posted on the IRS web site at: www.irs.gov

IMPORTANT NOTE: USFSG does not make any warranty or representation as to the completeness or accuracy of this information, nor assume any liability or responsibility that may result from reliance on such information. The information contained herein is not intended as legal or tax advice, and readers are encouraged to seek the advice of a competent tax professional where such advice is required.

A Yes in the “Reportable” column means that transactions generated under this MCC are reportable under sections 6041 or 6041A of the Internal Revenue Code. A No means the transactions are exempted from reporting based on the section of the Internal Revenue Code specified in the “Rev Proc Exemption” (Revenue Procedure Exemption) column.