When you charge your customers sales tax, it posts to the Sales Tax Liability account (as a credit) in your chart of accounts. When you pay the collected tax to your state revenue department, you would post that payment to the same Sales Tax Liability account (as a debit) to reduce your liability. Generally, the sales taxes would not go through your P&L. Now if you are talking about sales taxes you pay on purchases, then in that case, I would post the taxes to the same expense account as the purchase. In other words, if you purchased office supplies on which sales taxes were charged, the entire amount including sales taxes paid would post to office supplies. Make sense?
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When you charge your customers sales tax, it posts to the Sales Tax Liability account (as a credit) in your chart of accounts. When you pay the collected tax to your state revenue department, you would post that payment to the same Sales Tax Liability account (as a debit) to reduce your liability. Generally, the sales taxes would not go through your P&L. Now if you are talking about sales taxes you pay on purchases, then in that case, I would post the taxes to the same expense account as the purchase. In other words, if you purchased office supplies on which sales taxes were charged, the entire amount including sales taxes paid would post to office supplies. Make sense?
April 02, 2019 10:27 AMThe answer to this question depends on whether you are keeping your books on the cash basis or the accrual basis. If you are using GAAP (generally accepted accounting procedure - which is required for public companies), you are using the accrual basis. Many small private businesses however, do use the cash basis for their books, and federal income tax is calculated on the cash basis. On the accrual basis, you record a liability and an expense when you collect the sales tax from your customers. Quickbooks does this for you when you set up sales tax in Quickbooks Online and record it on invoices, or use the invoice sales tax feature in Quickbooks Desktop. (The accrual basis records expenses when incurred, not when paid: so on your invoice Quickbooks adds this for you: debit expense, credit liability.) Then the liability for the sales tax is reduced when the sales tax is paid. (Debit liability, credit checking.) The expense or check would be recorded as paid from account checking, account paid would be your sales tax liability account. (Example: Accounts Payable - Vendor Department of Revenue).
If you are not recording sales tax on your invoices or sales receipts, then you likely are using the cash basis for sales tax . In this case, the expense would be recorded when the sales tax is paid: Debit sales tax paid expense, credit checking. Quickbooks Online does this for you when you enter an expense the usual way: +, Expense, pay from account checking, down below the account would be the sales tax expense.
