You can deduct various federal, state, local, and foreign taxes directly attributable to your trade or business as business expenses. Generally, you can only deduct taxes in the year you pay them. This applies whether you use the cash method or an accrual method of accounting.
Per IRS Publication 535 Business Expenses:
Real Estate Taxes - Deductible real estate taxes are any state, local, or foreign taxes on real estate levied for the general public welfare.
Income Taxes - You cannot deduct federal income taxes. A corporation or partnership can deduct state and local income taxes imposed on the corporation or partnership as business expenses.
Employment Taxes - These include your share of social security and Medicare taxes as an employer, along with unemployment taxes.
Franchise Taxes - You can deduct corporate franchise taxes as a business expense.
Personal Property Tax - You can deduct any tax imposed by a state or local government on personal property used in your trade or business.
Excise Taxes - Generally, you can deduct as a business expense all excise taxes that are ordinary and necessary expenses of carrying on your trade or business.
Fuel Taxes - Generally, taxes on gasoline, diesel fuel, and other motor fuels that you use in your business are included as part of the cost of the fuel. Do not deduct these taxes as a separate item.
Occupational Taxes - You can deduct as a business expense an occupational tax charged at a flat rate by a locality for the privilege of working or conducting a business in the locality.
Sales Tax - Do not deduct state and local sales taxes imposed on the buyer that you must collect and pay over to the state or local government. Also, do not include these taxes in gross receipts or sales.
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