I just picked up on the blind side of all this. Rather than this being so much about a cross reference for the IRS to scrutinize where the money goes, it's a much better vehicle for states to collect sales tax on out-of-state purchases, especially online ones.
CNNMoney has a good article that might support my contention that this isn't total mayhem yet. The last paragraph reads,
"
The IRS has a draft version of the 1099-K form available now for public feedback, and will begin requiring the form's use next year. The additional 1099 requirements take effect in 2012. The agency is in the process of drafting its guidance on them.
link:
Stealth IRS campaign mandates millions of new 1099 tax forms - May. 21, 2010
Hopefully, some sort of common sense will prevail, but now that I see the state tax aspect, I see this taking off. IOW, you get a choice, pay the state sales tax or forgive your deduction.