Taxes Made Simple

Larissa (jewelry designer) asks:

Mike, I have a small business creating jewelry and selling it online. Where do I deduct sales tax that I pay for my business?

Answer:

Hi Larissa.

It depends if you are talking about sales tax that you are paying for items that you purchase (supplies, for instance) or if you are talking about sales tax that you collect from clients and that you will eventually be remitting to your state or city.

If you are talking about sales tax that you’re paying on items you purchase for use in your business, you simply include the sales tax when reporting the cost of the items. For instance, if you purchased $50 worth of printer paper in a year, and were charged $3 sales tax, you would report $53 as your deduction for the printer paper. 

If you’re referring to money that you collected on sales that you made, and which you will eventually be sending to your state or city, you would report the amount as Licenses & Taxes expense on your Schedule C.

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