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Does a third party settlement organization have to report Merchant Category Codes (MCC)

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No, a third party settlement organization (TPSO) does not have to report Merchant Category Codes (MCC). TPSOs do not use MCCs to classify payees and therefore do not complete Box 2 of Form 1099-K, Payment Card and Third Party Network Transactions.

Sources:
§ 6050W. Returns relating to payments made in settlement of payment card and third party network transactions
Publication 1220 (9/2023)
FS-2023-6
FS-2024-3
IRM Part 21. Customer Account Services. Chapter 7. Business Tax Returns and Non-Master File Accounts. Section 4. Income Taxes/Information Returns

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