I was audited by the state of MN and it was determined that I should have been collecting sales tax. I ended up having to pay a total of about $2300 in tax and penalties out of my pocket. How do I claim this as a deduction on my schedule C?
Additional Info: While I have always reported income from a pet breeding business, I did not realize that pet sales were subject to sales tax in the state of MN. I was audited by the sales tax division. Since I had never collected the sales tax from customers, I had to pay that amount out of my own pocket, plus interest and penalties.
