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What does All Sales Final include?

Schedule C, Part ll Expenses. Do you include sales tax?

  • On schedule C, Part ll Expences do you include sales tax (local and federal) or do you segregate the tax and put it on line 23 taxes and licences. IRS told me to leave sales tax enter as gross receipts. Example: ATT phone bill, IRS told me to leave the entire bill amount under Utitlites, don't segregate the sales tax. Same with an advertising bill. I'm confused.

  • Answer:

    " IRS told me to leave sales tax enter as gross receipts" This sounds like you are referring to the sales tax collected on items you sell. If this is the case, then technically this is incorrect as sales tax is not income. It is a fiduciary tax meaning you are only acting as an agent for the state by collecting and forwarding it. But for many small operators it is easier to lump it in the income (gross receipts) and then itemize it as an expense under Part V Other Expenses. "don't segregate the sales tax" BUT, if you are referring to the sales tax you paid for something like office supplies that you use, then it is part of the cost of the item and do not segregate the tax. And don't forget, you have to depreciate any capital expenses; eg, furniture, equipment, etc. But you can accelerate the depreciation in the year you bought it under Sec. 179.

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Sales tax on purchases is considered to be part and parcel of that expense. If you buy a piece of equipment, the total cost, including sales tax, is considered your basis in the property. The same rule applies for telephone taxes and utilities. If you paid $106 for utilities ($100 for the power, $6 tax), your cost for the utility expense is $106. Without the expense, you would not have the tax. The tax is part of that expense.

bjlevine

Leave it with the underlying expense. Something that is paid separately like a Business Personal Property Tax would go under "Taxes and Licenses".

Wayne Z

whatever you pay in taxes on bills such as utilities is included in your expense, you simply report the amount of the bill you paid now when it comes to the sales tax you collect on your products, if you include it in your gross receipts, you will report what you paid out as an expense(this will never coincide with your sales receipts since you are paying the 4th quarter sales tax in the next year) if you report your sales receipts(without including the sales tax) then you have no stand to report what you pay as an expense if you report your sales and the sales tax as a payable, that account should be fairly accurate to what you collected and what you paid out

tro

If Sales tax is included in your Gross Sales, then it is recorded as income...You should show the amount you paid as expense since you are simply an agent for sales tax. You collect it and then pass it on to the State

prescientone

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