I have a client who owns a retail store and needs to file a Sch C. as sole prop My question is should she count in total income the sales taxes that she collects and then subtract the taxes as an expense OR should the taxes not be included in total gross income.
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I have
always included it in gross sales and expensed the sales tax. -
It depends on whom the taxes are imposed, If the taxes are on the buyer and the business is simply collecting the tax and forwarding to the taxing authority, the tax should not be included as income or shown as an expense.
If the tax is imposed on the seller of the goods, then report the amount collected from the buyer as income and deduct the sales tax on line 23 of Sch C.
See TTB page 5-12 for the details.Comment
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Sales Tax
Thank you for responding. I will follow the directions in the TaxBook on this matter. Apparently there are two ways of reporting this with both ending with the same result.Comment
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