Update: Beginning in 2012, taxpayers will be required to report payments made to corporations and payments made in exchange for merchandise. We will not, however, be required to report payments made via credit or debit card.
obliviousinvestor.com
The details to the new regulationóSection 9006ówhich dramatically changes the 1099 reporting requirement have not been finalized by the IRS yet. However, Commissioner Doug Shulman has said the IRS will provide small businesses with at least partial relief from this paperwork burden.
During a speech at the American Payroll Associationís convention, Shulman said "we plan to use our administrative authority to exempt from this new requirement business transactions conducted using payment cards such as credit and debit cards. These transactions will already be covered by reporting requirements on payment card processors, so there is no need for businesses to report them as well. So, whenever a business uses a credit or debit card, there will be no new burden under the law."
National Small Business Association
Apparently the IRS will require the processing companies to report directly, so in this case a 1099 from you is considered redundant paperwork.