Business & farm

Sales tax collected is a liability and should not be included in gross income. Neither should the payment to the state/local government be deducted as an expense. Please read IRS Publication 334. Chapter 5 -Business Income states clearly "Sales tax. State and local sales taxes imposed on the buyer, which you were required to collect and pay over to state or local governments, are not income."

 

Additionally, Chapter 8 -  Business Expense subsection Taxes has the following Caution Message "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."

 

Publication 334 (2023), Tax Guide for Small Business | Internal Revenue Service (irs.gov)

 

I hope this provides clarity for anyone looking for answers on this topic.