I have a hobby - to me - in Indiana, USA that the IRS views as a business due to the fact that I am making money which is my focus. I purchase raw material to make a sellable product. Because I don't have a business license, I just pay the taxes when purchasing the raw materials. Since most of my sales (99%?) are out-of-state sales, sales tax is rarely collected by me, nor can I collect any tax without proper setup with the state. What little in-state sales I do have, I tally the total and pay this amount through my use tax portion on my income taxes (sales tax is the same rate throughout the state).

In my accounting software, I report my paid sales tax on purchases to the sales tax general ledger expense account. Because I am not collecting sales tax on sales, the account after years is quite large negative amount. My accountant is aware of my recording style and also does my taxes. They have not directed me otherwise, nor have I pressed them on it.

Since I don't have a business license, how should I record taxes paid on purchases? Both for items directly used to make a product and also on expense item?? I don't think I can file a tax form asking for reimbursement of these taxes since I don't have a business license.