Q. Are the sales taxes I pay to my state for my business sales a deductible expense on my Schedule C?
A. Simple answer: yes, but only if you include the sales tax collected in your income.
You actually have a choice: 1. You can include the sales tax, that you collect, as gross income received. In that case, you claim a deduction for the sales tax that your remit to the state. 2. Don't include sales tax collected, in "Gross receipts and sales" or Other income. In that case, you also don't claim the deduction.
Still not clear. I do not charge sales tax to my customers but I pay sales tax to my state for those sales. Does that make those taxes paid to my state a deductible expense?
Q. I do not charge sales tax to my customers but I pay sales tax to my state for those sales. Does that make those taxes paid to my state a deductible expense?
A. Yes.
Why? There are two ways to look at it. 1. You have effectively included sales tax in the price you charge your customer, so answer #1 above applies. You include the sales tax, that you collect, as gross income received. Then you claim a deduction for the sales tax that your remit to the state.
The 2nd way to look at it is: the sales tax paid is an expense you incurred that was not reimbursed (or effectively paid) by the customers. So, it was a legitimate business expense that reduced the amount of net income.