As I said your gross collection gets reduced by the sales tax collected ( on behalf of the state ) --- thus you are not taxed on this by the State or the Fed.
For example if your State sales tax rate is 5%, then your total collection is changed to your gross as follows
Net Gross = (Amount collected / 105) X 100. so you will collect $105 out of which $100 belongs to your business and $ 5 goes to State. So your taxable income before expenses etc., is $100.
Make sense ?
