Is income tax expense an operating expense?

Shouldn’t tax be an operating expense? Companies pay tax on the profits they have on their operating activities, right? Is tax operating expense in the cash flows statement?

Category: Tags: asked December 2, 2012

2 Answers

Income tax is not included in the operating expenses in the profit and loss as the standards require separate disclosure. They are however included in the operating activities in the cash flow statement as they are part (a result) of the day to day operations (at least up to a point).

No income tax is not an operating expense! The operating expenses are used to calculate your income tax but the tax itself is not an operating expense.

Thing about it like that. You pay tax on your operating results. So the tax you pay depends on your profits less expenses (which includes the operating expenses). The tax is simply the profits (after expenses) that you will have to share with the IRS!

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