Square 1099-K - Where to deduct sales taxes paid from total reported by Square

[LKarkos]

Using TurboTax Premier Desktop.  I received a 1099-K from Square because I sold more than the $20K threshold. Square reported the full total amount they remitted to me, but I then had to pay state sales tax out of that full amount they remitted.  Where can I deduct the state sales tax I paid as an allowable expense?

I only sell products at craft fairs and similar items and supplement my normal full-time income with the proceeds. I can not use the "hobby" income designation. Am I using the wrong version of TurboTax?

[MonikaK1]

If you are self-employed, even part-time, and need to enter different types of expenses, then upgrading to Home and Business may be better for you. TurboTax may prompt you to upgrade depending on your entries.

See this tips article for more information about entering business income and deductions.

You can enter sales taxes paid under taxes and licenses on Schedule C, as long as you are not double-deducting them by reporting net sales.

[ATA Paralegal Services · Accepted solution]

To properly deduct sales taxes and fees from the total reported by Square, you’ll want to navigate to the Business Expenses section of your software.
​Where to Enter the Deductions
​While you likely entered your 1099-K under the 'Income' section, that entry point doesn't always prompt you for the specific deductions Square took out before the money hit your bank. To fix this:
​Go to Business Expenses and look for Other Common Expenses (or 'Miscellaneous/Other Expenses' at the bottom).
​You can enter these as specific line items to keep your records clear. I recommend labeling them specifically so you can track the adjustment back to your 1099-K:
​Processing Fees: Categorize under 'Commissions and Fees' (Schedule C, Line 10).
​Sales Taxes: Categorize under 'Taxes and Licenses' (Schedule C, Line 23).
​Combined Adjustment: If you prefer, you can use the 'Other Expenses' section (Line 27a) and label it: "1099-K Adjustment: Square Sales Tax & Fees.