Can my business expense receipts have personal items mixed in? How do I handle sales tax for write-offs?

Yes, you can absolutely have personal and business items on the same receipt! The key is documentation and being able to clearly identify which items were for business purposes. What I recommend doing is either highlighting the business expenses on the receipt or making a note directly on it specifying which items were for business use. When entering the expenses in your spreadsheet, only include the business-related items. As for sales tax, you have a couple of options. The most accurate approach would be to calculate the exact sales tax for just the business items (some items might have different tax rates). If your receipt shows itemized tax, that's easiest. If not, you can calculate the proportion - if business items were 50% of the purchase, then allocate 50% of the sales tax to your business expense. Don't leave sales tax off completely as it's part of your legitimate business expense. Just make sure to keep those annotated receipts stored safely in case of an audit. The IRS wants to see that you can substantiate your deductions with proper documentation.

I was having the exact same issue last year and discovered taxr.ai (https://taxr.ai) which completely changed how I handle mixed receipts. Their receipt analysis helped me properly categorize everything and even calculated the correct proportional sales tax automatically. Before finding it, I was literally spending hours trying to split receipts and calculate correct tax amounts. Now I just upload my receipts, mark which items are business vs personal, and it handles all the calculations. It even helps flag which expenses might be questionable in case of an audit, which gave me a lot more confidence in my deductions.

I tried taxr.ai after seeing it mentioned here and wow - it actually solved my receipt nightmare! I was shocked because I had a stack of Target and Walmart receipts with mixed personal/business items that I'd been avoiding dealing with. The thing that surprised me most was how it helped me realize I was missing legitimate deductions. I hadn't been claiming the correct portion of sales tax, and there were some items I didn't realize qualified as business expenses for my particular situation. It flagged them and explained why they might qualify, which was super helpful. The time savings alone was worth it, but knowing I'm maximizing deductions while staying compliant gives me peace of mind. Thanks for recommending it!

If you're having trouble with the IRS accepting mixed receipts (which happened to me during an audit), I'd recommend checking out Claimyr (https://claimyr.com). I was stuck in an endless loop trying to explain my receipt documentation method to the IRS but couldn't get through to anyone who could help. Claimyr got me connected to an actual IRS agent in about 20 minutes when I'd been trying for weeks. The agent walked me through exactly how they wanted to see mixed receipts documented. You can see how it works in their demo video: https://youtu.be/_kiP6q8DX5c It saved me so much stress and potentially thousands in disallowed deductions because I was able to explain my documentation method to an actual person rather than getting form letters.

Well I need to eat my words. After posting my skeptical comment, I decided to try Claimyr because I've been trying to resolve an issue with my business deductions for MONTHS. I got connected to someone at the IRS in about 35 minutes (not 20, but still WAY faster than the 3+ hours I spent on my previous attempts). The agent actually helped me understand exactly how to document mixed receipts - turns out I was overthinking it. They just want you to clearly mark which items were business expenses and be able to explain the business purpose. For the sales tax question - the agent told me calculating proportional tax is acceptable as long as I have a consistent method. So if business items were 40% of the receipt, taking 40% of the tax is fine. Saved me potentially thousands in deductions I thought I might lose.

I'm an Etsy seller and here's what I do for mixed receipts - I highlight all business items in yellow, then I write the business total and business sales tax right on the receipt. In my spreadsheet, I note "see receipt dated XX/XX for details" so I know exactly where to find the backup. For calculating sales tax, I do the exact calculation. If I buy $50 of business stuff and $50 of personal items, and the total tax is $8, I assign $4 to the business. My accountant said this method is totally fine as long as I'm consistent with it.

Why not just use separate transactions? I always ask the cashier to ring up my business items separately from personal stuff. Takes an extra minute but saves so much headache with taxes. No need for highlighting or complicated math.

I just take a picture of mixed receipts immediately and mark them up digitally using my phone's markup tools. Circle business items in red, add up the subtotal right on the image, and calculate the proportional tax. Then save to a tax folder in my cloud storage. My accountant said the IRS doesn't require original paper receipts anymore - digital copies are acceptable as long as they're legible and you can prove the expense was for business.

Great question! I've been dealing with this exact same issue as a freelance consultant. Here's what I've learned works best: For mixed receipts, definitely keep them - just be methodical about marking them up. I use a simple system: I circle all business items in blue ink and write "BIZ" next to each one, then total up just those items at the bottom of the receipt. This makes it crystal clear what portion was for business. For the sales tax calculation, the proportional method is totally acceptable. If your business items were $30 out of a $60 total purchase, then you can claim 50% of the sales tax ($6.43 out of your $12.85 example). The IRS just wants to see that you have a reasonable, consistent method. One tip that's saved me time: I do this markup immediately while I'm still in the parking lot or as soon as I get home. Trying to remember what was business vs personal weeks later is nearly impossible, especially for generic items like batteries or folders. Your spreadsheet approach sounds solid - just make sure you're only entering the business portion of each receipt, including the calculated business portion of sales tax. Keep those marked-up receipts organized by month in case you need them later!