Sales tax you collected and remitted belongs on Line 23, taxes and licenses.
Why line 23
There is a condition on this one and it decides everything. Sales tax you collected from buyers is deductible on line 23 only if you also included the amount collected in gross receipts on line 1. If you excluded the collected tax from gross receipts, as most sellers do when the platform reports net, there is no deduction to take, because you never reported the money as income. The two treatments give the same taxable profit, so the error is doing one half of either: reporting gross receipts including tax and forgetting the line 23 deduction, or reporting net and deducting the remittance anyway.
Stop looking up lines one at a time. ClaryBook totals your year into an IRS Schedule C worksheet in form order, Part I and Part II line by line, so sales tax you collected and remitted lands on Line 23 without you sorting it.
Start for freeWhat sales tax you collected and remitted is confused with
- not deductible, not deductible
- If the collected tax was never in your gross receipts, deducting the remittance on line 23 is a double benefit and is not allowed.
- Form 4562, form 4562, carried to schedule c line 13
- Sales tax you paid as the buyer on business property is added to that property's cost and recovered through depreciation, not deducted on line 23.
- Schedule A, schedule a, personal itemised deduction
- Sales tax on personal purchases is only ever a Schedule A itemised deduction, and never a Schedule C expense.
Examples that belong on line 23
- $8,400 of sales tax collected and remitted, with gross receipts reported as $112,400 including the tax
- $0 deducted where the $8,400 was excluded from the $104,000 of gross receipts reported
- A $2,150 quarterly state sales tax remittance, with receipts reported gross
- A $640 monthly local sales tax remittance in a city with its own rate
- A $95 marketplace facilitator reconciliation payment on receipts already reported gross
What does not belong here
- A deduction for tax collected that you excluded from gross receipts.
- Sales tax you paid on equipment you bought, which goes into the asset's basis.
- Use tax on personal purchases.
- A penalty for filing the sales tax return late.
The limit that applies
Line 23 allows this deduction only when the collected tax is included in gross receipts on line 1. Pick one treatment and make both halves match.
What to keep
Keep the filed sales tax returns and proof of remittance, and be able to show whether your line 1 gross receipts figure was gross or net of tax. Your point of sale or platform reports are what prove which one you used.
Other expenses on line 23
| Expense | Line |
|---|---|
| a city or county business license | Schedule C, Line 23 |
| a state franchise tax or LLC annual fee | Schedule C, Line 23 |
| a state professional license renewal | Schedule C, Line 23 |
| employer payroll taxes and the employer half of FICA | Schedule C, Line 23 |
| federal and state unemployment tax | Schedule C, Line 23 |
| personal property tax on business equipment | Schedule C, Line 23 |
| real estate property tax on a business building | Schedule C, Line 23 |
Related lookups
- Is a car payment deductible on Schedule C?
- Where does a website build go on Schedule C?
- Where does state income tax go on Schedule C?
Sources
This page explains how Schedule C lines work. It is general information, not tax advice for your situation. If an expense is large or the answer turns on a fact about your business, confirm it with your tax preparer.
Looking for a different expense? The full Schedule C line lookup has every line from 8 to 27 with the expenses that belong on each, and Schedule C expense categories walks the whole form in order.
Stop looking up lines one at a time. ClaryBook totals your year into an IRS Schedule C worksheet in form order, Part I and Part II line by line, so sales tax you collected and remitted lands on Line 23 without you sorting it.
Start for free