I am a commissioned employee. My employee deducts services charges related to the sales. QUESTION: Should my commission be based on total sales less the deductions, or should the deductions come out of my commission...

It really does not matter IF you are being paid under Form 1099-MISC as an independent contractor (most commissioned employees are paid in this manner).

If he deducts the service charges from your commission, that net pay should be reported on Form 1099, which is transferred to the Schedule C for tax calculations.

If the commissions are deducted from your commission. But deductions are NOT reflected as net pay on the Form 1099, YOU should deduct the service charges on the Schedule C as business expenses.

In either case, the taxable pay is the same.

Now, if you are being paid under Form W-2 as an employee, then it makes a BIG difference, because deducting the expenses on Form 2106 as an itemized expense is MUCH more difficult and will not even be deductible if you do not itemize.

Also various companies do things differently, in one case I make a certain commission rate, but they come back and hold out advertising, use of desk, ( office fee) and other costs. Another company may pay a lower commission rate but do not deduct any of those costs.

IN the end it will be the contract you settle with or accept from the company you are going to sell for