Q. I do not charge sales tax to my customers but I pay sales tax to my state for those sales. Does that make those taxes paid to my state a deductible expense?
A. Yes.
Why? There are two ways to look at it. 1. You have effectively included sales tax in the price you charge your customer, so answer #1 above applies. You include the sales tax, that you collect, as gross income received. Then you claim a deduction for the sales tax that your remit to the state.
The 2nd way to look at it is: the sales tax paid is an expense you incurred that was not reimbursed (or effectively paid) by the customers. So, it was a legitimate business expense that reduced the amount of net income.
