James D. Lynch
WHICH TAXES CAN A BUSINESS DEDUCT AS A BUSINESS EXPENSE?
There are many different kinds of taxes. Some are personal taxes, while others are business taxes.
Examples of deductible business taxes include:
● Payroll taxes: the employer's portion of FICA (Social Security and Medicare tax) as well as federal & state unemployment tax. ● State business income taxes and franchise tax. ● Property taxes on property owned by the business. ● Taxes on business purchases (e.g. sales tax paid on purchased items, airline tax and hotel tax for business travel, etc. Note these taxes are not separated out. They are considered a part of the cost of the item purchased.)
Personal taxes, such as your personal income taxes and property taxes on your personal residence, are not business deductions. These should therefore be paid from your personal bank account. If you pay personal taxes from your business bank account, they must be recorded as distributions and not as expenses.
Sales tax collected from customers should not be recorded as an expenses when remitted to the state, nor should it be recorded as income when collected from customers. Instead, it should be recorded as a liability in a sales tax payable account.