Our lender takes a percentage of daily sales. Is every remittance deductible interest?
Merchant Cash Advances and Daily Remittances. A specific owner scenario, the facts that change the answer, and the records needed for a tax review.
By AE Tax Advisors Team · Updated October 28, 2026
No. A daily remittance may include repayment of principal or a purchase-price component, not only deductible interest. Review whether the arrangement is a genuine loan or a sale of receivables and identify the financing economics.
A specific business-owner situation
A retailer receives a cash advance and remits a percentage of daily sales until a contractual amount is reached. The provider calls its charge a factor fee. The business needs the agreement and payment history before expensing every withdrawal.
Illustrative example, not a client result.
What to establish before filing
- Identify legal rights and actual repayment obligations.
- Separate financing proceeds from sales receipts.
- Review the cost and timing method for remittances.
Which fact changes the answer?
A receivables purchase with genuine collection risk differs from a fixed repayment obligation. Labels used in marketing materials do not decide the tax classification; provide the actual risk and reconciliation provisions.
A mistake to avoid
Deducting every remittance while omitting the financing liability can significantly understate taxable profit.
Records that support the decision
- Funding agreement.
- Fee calculation.
- Daily debit history.
- Sales and reconciliation reports.
The decision to document
Ask the advisor for a transaction classification and repayment schedule. Use it to reconcile gross sales, financing costs and the remaining contractual balance each month.
Business-owner tax planning and coordination · Discuss your business and advisory needs
Related questions
- We refinanced our business loan. What happens to the old loan's remaining financing costs?
- The lender deducted fees before funding our loan. Can we expense the difference immediately?
Sources and editorial context
- IRS Publication 4681: canceled debts and repossessions
- IRS Publication 538: accounting methods
- Section 263: capital expenditures
General educational information prepared with AI assistance. No individual professional review is claimed. Apply the relevant tax-year rules to the actual records. Editorial policy · AI disclosure.