No. State income tax withholding, whether from a Form W-2 or an Form 1009-MISC, is not a rental expense nor a business expense. While state taxes withheld during the tax year may be included, subject to limitation, on Schedule A as an itemized deduction, they play no other role in the calculation of income, deductions, or federal income tax. They are simply funds deposited with the state to offset your state income tax liability.