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Level 6

When to deduct State Sales Tax Collected for Business?

My business collects state sales tax and pays Annually, ex. 03/01/2018 - 02/28/19.

So for 2018 income tax return (schedule C) do we use the amount paid in 2018 on the 2018 State sales tax return, which was for 03/01/2017 - 02/28/2018? or do we use the actual amount collected in 2018 and deduct that?

 

Thank you!

1 Best answer

Accepted Solutions
Level 20

When to deduct State Sales Tax Collected for Business?

You deduct the sales tax you paid to the state the year you actually pay it.  

5 Replies
Level 18

When to deduct State Sales Tax Collected for Business?

from irs publication 334

 

Do not deduct state and local sales taxes imposed on the buyer that you must collect and pay
over to the state or local government. Do not include these taxes in gross receipts or sales.

 

however, if you get a 1099misc for sales which includes sales tax,  then report the 1099 amount to avoid a matching notice from the IRS.  deduct the taxes on the line for returns and allowances.  

Level 6

When to deduct State Sales Tax Collected for Business?

Thank you sir for your detailed reply but that is not the question I was looking for the answer to 🙂

 

I am deducting the sales tax collected and paid to the state that was reported on my 1099-K and included in my gross receipts reported on my return.

What I want to know is: since I pay the state Annually, from 03/01/2018 - 02/28/19, do I use the amount paid in 2018, which was for 03/01/2017 - 02/28/2018? or the actual amount collected in 2018 and deduct that?

 

Thanks for any help or advice!

Level 18

When to deduct State Sales Tax Collected for Business?

you didn't read my answer or didn't understand it 

 

since you received a 1099 K that included sales   tax report that as sales to avoid a matching issue with the IRS

report the sales tax included on the line for returns and adjustments.      when you pay is irrelevant. 

 

 

Level 6

When to deduct State Sales Tax Collected for Business?

Thank you, I guess don't understand your answer 🙂

 

I am receiving a 1099K and reporting that amount as sales. That amount includes state sales tax I collected.

 

My question is do I deduct the amount in tax collected that is included in that 1099K? OR do I deduct the amount I actually paid back to the state in 2018 (which includes tax collected from 2017 because I pay annually March-March) I would guess the former, but dont want to make assumptions 🤔

 

Thank you again for your knowledge and attention!

Level 20

When to deduct State Sales Tax Collected for Business?

You deduct the sales tax you paid to the state the year you actually pay it.