I have been preparing returns for a licensing agency for years, We don't report the state's portion of the $$ at all (income or expense) .

In our state, the funds go into a State account, and the agency portion is periodically transferred to their account.

If the funds all went into the Agency account, I would probably report all of the receipts, with an "other expense" with some kind of description such as "License Fees and taxes collected for and remitted to State of ___ "