I recommend you include *ALL* business income in the gross business income. Then you include the sales tax paid to the taxing authority in the amount on line 23 of the SCH C. Remember, states are not the only taxing authority that can impose a sales tax. Such a tax can be imposed at the county level, city level and even township level. By including the taxes collected in your gross business income you can then itemize them for the type of tax they are in the "Taxes and Licenses" section of the program. Then should you ever be audited by a lower level taxing authority you have yet another paper trail to reinforce your position on weather you paid those taxes or not, and if the amount paid was correct or not.
The "Taxes and Licenses" data entry category is located in the Business Expenses section of the program.
