For vending business, where do I put the purchases made for resale on the tax form?

[Username3663139]

Additionally, out of gross sales, where are the taxes paid to the state tabulated?

[ColeenD3]

You can keep any inventory and charge the purchases to Cost of Goods sold, or you can include it under supplies. 

Line 23

Do not deduct the following.

• Federal income taxes, including your self-employment tax. However, you can deduct one-half of your self-employment tax on Schedule 1 (Form 1040), line 14 (but if filing Form 1040-NR, then only when covered under the U.S. social security system due to an international social security agreement).

• Estate and gift taxes.

• Taxes assessed to pay for improvements, such as paving and sewers.

• Taxes on your home or personal use property.

• State and local sales taxes on property purchased for use in your business. Instead, treat these taxes as part of the cost of the property.

• State and local sales taxes imposed on the buyer that you were required to collect and pay over to state or local governments. These taxes are not included in gross receipts or sales nor are they a deductible expense. However, if the state or local government allowed you to retain any part of the sales tax you collected, you must include that amount as income on line 6.

• Other taxes and license fees not related to your business.

[Username3663139]

I am the owner of the business and the only one. No employees, doing this as a side business. I work a regular 8-5 job and run this vending machine as a side business, providing drinks and snacks to fellow employees. I had a tax preparer tell me before, I had to tabulate gross taxes and then deduct the state taxes I paid. Before I wasn't reporting state taxes paid and only listing net  and the goods bought for sale so I got confused. So how would I list this? Gross with taxes and goods sold or net with goods sold?

I don't keep inventory and this is a cash only business.

[ColeenD3 · Accepted solution]

Which state taxes are you referring to? State income tax or sales tax? The quote above is from IRS Instructions for Schedule C. 

You do not have to keep an inventory, I just suggested it was one way to go. You can record it as supplies. If you paid sales tax on the purchase, include it in cost. 

Line 23

You can deduct the following taxes and licenses on this line.

• State and local sales taxes imposed on you as the seller of goods or services. If you collected this tax from the buyer, you also must include the amount collected in gross receipts or sales on line 1.

• Real estate and personal property taxes on business assets.

• Licenses and regulatory fees for your trade or business paid each year to state or local governments. But some licenses, such as liquor licenses, may have to be amortized. See chapter 8 of Pub. 535 for details.

• Social security and Medicare taxes paid to match required withholding from your employees’ wages. Reduce your deduction by the amount shown on Form 8846, line 4.

• Federal unemployment tax paid.

• Federal highway use tax.

• Contributions to state unemployment insurance fund or disability benefit fund if they are considered taxes under state law.

[Username3663139]

It's sales tax. Florida, no state tax. I'll look closer at the for in trying to fill in the box and see what comes out. I may have to make a change to last year's taxes.

[ThomasM125]

I'm not sure what tax form you are reporting the business income on, but I presume it is a schedule C. If so, the sales taxes could be reported as Taxes and Licenses on line 23 of schedule C.

However, it is more typical to report them as a deduction from your vending sales, as you are simply collecting them and paying them over to the state. As such, they are really not expenses of the business. 

The purchases would be listed as such, under cost of goods sold.