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Collected Sales Tax

I ran a shop and collected sales tax, I paid the state all of the sales tax that was collected through the shop. I was wondering if I enter total income including state sales tax collected, or if my total income would be everything I made before the taxes, or if there is a place somewhere on Turbo Tax to deduct or report the state sales tax that I paid back to the state?

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6 Replies
DaveF1006
Employee Tax Expert

Collected Sales Tax

To clarify, what type of return are you preparing? Is it a Schedule C or an entity return such as a 1065 or 1120S?

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Collected Sales Tax

A Schedule C

Collected Sales Tax

That is handled in one of 2 ways depending on how you report the income on Schedule C.....

 

>Income does NOT INCLUDE the sales tax collected and paid to the state - then you do not report the sales tax on your tax return.

 

>Income reported INCLUDES the sales tax - then the sales tax is entered as an expense under Taxes and Licenses, Schedule C line 23.

 

Where to enter expenses in the Online version

https://ttlc.intuit.com/questions/3636848-where-do-i-enter-my-self-employment-business-expenses-like...

Collected Sales Tax

Thank you so much!

Pete Tax
New Member

Collected Sales Tax

You do not include the sales tax that you collected and then paid to the state in Line 1, per the IRS instructions shown below.  These are taxes imposed on the buyer that you collected on their behalf and paid to the state.  They are not taxes imposed on the seller.

 

2023 Instructions for Schedule C (2023) | Internal Revenue Service (irs.gov)

 

Line 23 instructions:  You do not deduct:

  • 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.

DianeW777
Employee Tax Expert

Collected Sales Tax

It depends.  If you do not have a clear separation of the income versus the sales tax, you can report the sales tax and then take the deduction.  Your information is not wrong as published by the IRS, however not every business owner separates the income as instructed.  It's all right to deduct the sales taxes paid if they have been included in income as indicated by VolvoGirl.  

 

On the other hand it is not all right to deduct this expense if the sales tax was never included in the income reported on Schedule C.

 

@Pete Tax 

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