💡 Not All “Taxes” Are the Same in Your Books

Dr. Bryan Raya

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2h • Communities

One thing I see confuse many business owners is how different types of taxes are tracked in bookkeeping.

They’re all called “taxes”, but they are not treated the same way in your accounting.

Let’s answer three common questions.

1️⃣ Is sales tax a business expense?

❌ No.

Sales tax is not your money.

You collect it from your customer and temporarily hold it before sending it to the state. In your books, it is recorded as a liability, not an expense.

Think of it as money you are holding in trust for the state.

2️⃣ When I pay my federal and state income taxes, is that a business expense?

❌ Also no (for most small businesses).

Federal and state income taxes are generally considered owner taxes, not business expenses.

That means they usually do not appear on your Profit & Loss statement. Instead, they are recorded as owner draws or equity payments.

3️⃣ Are property taxes on a business asset a business expense?

✅ Yes.

Property taxes on business assets (such as real estate or equipment) are typically deductible business expenses.

These are recorded on your Profit & Loss as tax expense related to the business asset.

📊 Key takeaway:

Even though they are all called taxes, they are tracked differently in your books:

• Sales Tax → Liability

• Income Tax → Owner Equity / Draw

• Property Tax → Business Expense

Understanding this difference keeps your financial reports accurate and tax-ready.

If you have more questions about how to properly track money in your business, check out the DBR Bookkeeping Community where we break these topics down in simple, practical ways.

Let’s start Doing Business Right.

DBR

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