Where do I input my husband's quarterly WI sales tax that he's paid for his small business?

[Spino]

You only deduct sales tax if you reported it as income, or if it's a use tax that he paid for items consumed in the business. So it depends on your accounting. For instance, if you sold a box for $10 plus sales tax, did you declare $10 as the income you received or $10 plus tax as income? In the first case, the tax is just passing through your hands, while in the second case, it's come in and now you need to get it back out.

Assuming you do want to deduct it, you can deduct anywhere on Schedule C that makes sense to you. All expense categories are just for your accounting with a few specific exceptions like depreciation and health insurance. If you don't see a category you like, you can add it as a line in "other expense." I usually deduct things like this under "licenses and fees."

[jen_lebreck]

Thank you for responding! I believe I understand. We sold our product (a furnace) + tax, paid the sales tax via quarterly already. I don’t need to do anything else? I just figured I needed to report it somewhere. Does that make sense?

[Spino]

If your husband is in the business of selling furnaces, then he needs to pay self-employment tax on the profit from that business. This is reported on Schedule C.

Example: I have a garage sale and sold stuff I had accumulated in the garage, including a furnace that I was going to install in our cabin, but then we ended up selling the cabin and buying an RV. I collect sales tax on the furnace (or don't, I still owe the state unless they have a generous exemption for garage sales) and pay WI and my local town the sales tax that is due. But since I'm not in the business of buying and selling furnaces, I never reported the contents of my garage as "cost of goods," nor did I report my purchases at other garage sales as goods for sale, and I certainly didn't report my inventory of items in the garage I might sell every year. So no one would reasonably think I am in the furnace sales business or the garage sales business. And in fact if I counted up all my costs, it's more likely this is a hobby and sometimes I make money and sometimes I lose money. 

Example 2: I have a friend who wholesales furnaces (or not a friend, that's not the point.) I discover that DIYers will buy these furnaces, which I buy at a 40% markdown, very willingly at a 20% markdown. Sometimes I help them install them, since my main business is working for a commercial HVAC operation. In this case it is clear that I am doing this to make a profit, it's my own business (I'm not an employee), and I probably make more than I spend over time or I'd stop doing it. The first time, my buddy just buys me a steak dinner and takes me hunting. I don't report that. But he tells his friends, and at the end of the year I've sold another furnace to his friend, gotten my sales tax license, and I'm hoping to sell more furnaces. So I report my income and my expenses on Schedule C, including mileage for my truck, a few new tools I bought, the cost of the furnaces, and the hoist I bought to get the furnaces in and out of the truck. I might report a loss the first year, but I expect to make money three out of the first five years going forward.

Now for the sales tax. If I included the sales tax I collected as income or did not separately charge sales tax, then certainly the sales tax I paid to WI and Sheboygan are expenses of doing business. If I reported the sales as income without including the sales tax I collected, then it is not an expense, but the cost of my sales tax licenses is, as well as the $15 I had to pay a notary, and also the $100 I had to pay an accountant to help me sort it all out when I handed him a box of expenses, or the TurboTax home and business my wife bought instead of me paying an accountant, but not the night in a hotel or the fancy meal out I bought to thank her, because you can bet your bottom dollar we didn't spend that time discussing the business I ran out of my garage.

[jen_lebreck]

Thank you very much! You really know your stuff. I understand perfectly now. I guess I was confused on paying sales tax and paying the sales tax as just the change of hands. My husband has a side HVAC business no employees, basically a friends and family gig, so I’m a bit new to the business tax side. Thanks again!