Tax Year Prior to 2020: My Business 1099K includes Sales Tax I collected & paid quarterly to my state. How do I deduct that?

[ajpn]

The only answer I have found is that sales tax collected is not included on the 1099, but it is in fact on a Paypal 1099K. I am trying to find out how and where to enter this deduction.

[KarenL2]

You can enter those in as Taxes and Licenses.   Just be careful to not combine the 1099-K income with your 1099-MISC income.  Some of your 1099-MISC income will likely be included on the 1099-K.

So, the result for your Gross Receipts on line 1 of your Schedule C for your business should be every dollar you actually received, including all your sales taxes.  Then, deduct your credit card processing fees, sales taxes paid, etc.

To enter taxes Sales Taxes paid into the TurboTax Home & Business software:

• Business Tab
• Continue or I'll Choose What I Work On (if they show up)
• Business Income and Expenses
• select Edit next to your business (if it is there)
• scroll to Business Expenses
• then, Other Common Business Expenses
• select to Update (or Revisit)
• on that screen scroll down to Taxes and Licenses

[donnamallery_cpa]

Sales tax is NOT an expense and you can't write it off. When you collect Sales Tax, report it as a liability. When paid, you relieve or zero out the liability. You are not "out" any cash, so therefore it isn't an expense. I could go deeper on my answer, but that would only be relevant if you collected too much or not enough. Personally, in these latter examples, I would maintain those balances in the liability account for possible offset in future months. If it is appropriate to "write-off" the overage or under collection, only THEN would you report either an expense or income. You only record tax in the Tax and Licenses category if the tax is a cost to the business. An example would be income tax. And while I wouldn't recommend it, you could break out your utility bills and record the tax expense in the tax category, The key is to report consistently so you are able to comparing your expenses from year to year and/or to similar businesses.

[VolvoGirl]

It will be an expense you can write off if it was included in the gross income you reported on schedule C.  No problem doing it that way.  Then it will net out.