Line 23 of the Schedule C Contradicts itself in the beginning and end. See below. In fact any sales tax you collect for the state, county or local agency is in fact a liability and not a part of gross sales or revenues. This also applies for Hotel Taxes such as Transient Occupancy Tax and the like as long as you must report and pay the full amount of the Tax and are not allowed to keep any portion as income.
You can deduct the following taxes and licenses on this line.
State and local sales taxes imposed on you as the seller of goods or services. If you collected this tax from the buyer, you must also include the amount collected in gross receipts or sales on line 1.
Real estate and personal property taxes on business assets.
Licenses and regulatory fees for your trade or business paid each year to state or local governments. But some licenses, such as liquor licenses, may have to be amortized. See chapter 8 of Pub. 535 for details.
Social security and Medicare taxes paid to match required withholding from your employees’ wages. Reduce your deduction by the amount shown on Form 8846, line 4.
Federal unemployment tax paid.
Federal highway use tax.
Contributions to state unemployment insurance fund or disability benefit fund if they are considered taxes under state law.
Do not deduct the following.
Federal income taxes, including your self-employment tax. However, you can deduct one-half of your self-employment tax on Schedule 1 (Form 1040), line 15 (but if filing Form 1040-NR, then only when covered under the U.S. social security system due to an international social security agreement).
Estate and gift taxes.
Taxes assessed to pay for improvements, such as paving and sewers.
Taxes on your home or personal use property.
State and local sales taxes on property purchased for use in your business. Instead, treat these taxes as part of the cost of the property.
State and local sales taxes imposed on the buyer that you were required to collect and pay over to state or local governments. These taxes are not included in gross receipts or sales nor are they a deductible expense. However, if the state or local government allowed you to retain any part of the sales tax you collected, you must include that amount as income on line 6.
