My 1099-K includes state sales taxes collected. But when I add that into TurboTax, it does not reduce my tax due

[edmartin]

My 1099-K from Stripe has the gross amount collected in box 1. But that gross amount includes NC state taxes collected on transactions.  I went through TurboTax (Home & Business edition) and I've now gone back to include the state sales tax amount. I'm doing this in Business/Business Expenses/Other Common Business Expenses/Taxes and Licenses.  But when I include the sales tax, it is not having any impact.  I would expect that when I include sales taxes collected, it would get directly adjusted off of my gross from the 1099-K and my tax burden amount would change.  It's not income; it's passed-through to the state.  Am I doing something wrong or missing something?

[AliciaP1]

Your 1099-K is reporting the transactions that were paid to you.  The sales tax collected is referencing sales taxes you charged to your customers and has no impact on your personal state tax return.  You should not enter this amount anywhere.   Filing a sales tax return to report the collections and pay the state or locality is not a function of your annual personal tax return.  You need to reference the sales tax department for your state and locality, if it applies, to report these taxes.

[edmartin]

Maybe I'm not being clear or maybe I don't understand. But let's try an example.  My wife's business sells something to a customer for $100.  When the transaction is processed, tax is applied/collected. So the final credit card transaction is for $106.  Stripe is reporting $106 on the 1099-K.  But the real income on that transaction isn't $106 - it's $100.  The $6 is collected and then paid it to the state.  I shouldn't be subject to federal income tax on the $106... I should be subject to tax on the $100, right?

I'm not doing the in the personal section.  This is all being done in the business section of the Home & Business edition... so it's all Schedule C stuff.  

[AliciaP1]

That makes the situation more clear!  You need to report Sales Tax Expense and your Merchant Fees Expense if you're using the gross amount from your 1099-K.  The expenses should be the sales tax collected and the fees stripe charged you.

@edmartin

[edmartin]

Understood.  But there's my question.  When I add those figures into Turbotax, my bottom-line tax amount (meaning what I owe) does not change.  That doesn't make sense to me.

[AliciaP1]

There are many other conditions that could be keeping 2 lines of expenses from changing your income tax due.  One reason may be (but this is certainly not the only way...that's impossible to post here) that the expenses are not large enough to make a significant impact on net income and therefore will not change self-employment taxes.

You just need to ensure you have entered all your information correctly and have claimed all expense deductions against the self-employment income to report your best situation.

@edmartin