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6500expenseNormal balance: Debitbusiness

6500 — Taxes & Licenses

Taxes & Licenses covers what a business pays the government just to legally exist and operate — a business license renewal, a state annual report or franchise fee, personal property tax on business equipment, and the employer's own share of payroll taxes it owes as a business, distinct from what it withholds from employees.

As an expense, it carries a normal debit balance. What deliberately does not belong here is the owner's own federal or state income tax on business profit — that is not a deductible business expense at all in most structures; it is paid personally, effectively out of after-tax draws, not run through the business's own expense accounts.

Sales tax collected from customers also does not belong here, even though the name might suggest it — that money was never the business's own, and it lives in Sales Tax Payable (2300) as a liability until it is remitted, never as an expense.

What belongs here

  • business license and permit renewals
  • state annual report or franchise fees
  • the employer's own share of payroll taxes owed
  • personal property tax assessed on business equipment

What does not belong here

  • the owner's own personal federal or state income tax on business profit — not a deductible business expense in most structures, generally paid from after-tax draws
  • sales tax collected from customers — Sales Tax Payable (2300), a liability, never an expense
  • payroll tax withheld from an employee's own paycheck — Payroll Liabilities (2200) until remitted, not this account

Where it shows up

Shows on the income statement as an operating expense. On Schedule C, this maps to line 23, and deliberately excludes the owner's own federal income tax on profit.

Common questions

Does my own income tax go in this account?
No — the owner's personal income tax on business profit is generally not a deductible business expense at all in most structures, and it is not tracked in this account.
What about sales tax I collected from customers?
That was never the business's own money — it lives in Sales Tax Payable (2300) as a liability until remitted, not in this expense account.

Nearby accounts

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