Sales Tax Expense vs. Sales Tax Payable

Discussion in 'Microsoft Accounting' started by Wes, Mar 29, 2010.

  1. Wes

    Wes Guest


    When adjusting sales tax payable with MOAP 2009, which account should be
    used as the adjustment account? I've been using Sales Tax Expense but at the
    end of the year, MOAP will only show the adjustment amounts in Sales Tax
    Expense, not all of the sales tax I paid. It seems that I need to only use
    one or the other (Sales Tax Payable or Sales Tax Expense) to account for my
    total sales tax paid.
    Sometimes I have orders where sales tax is not collected but still have to
    pay based on the item total with shipping and therefore the total sales
    amount going to my cash accounts will not include sales tax. When I get an
    order where sales tax is not collected, I put a line item in the invoice for
    sales tax, making the total include sales tax even though that is not the
    amount going to the cash account. I then make a journal entry to credit the
    cash account and debit sales tax expense for the sales tax I added in the
    invoice to make the amount of income to the cash account correct. But again,
    the Sales Tax Expense account will only show these adjustment amounts and
    Sales Tax Payable will show all other sales where sales tax was collected as

    Hope this makes sense. If anyone has got any ideas on how to keep track of
    my sales tax where I will have one account that shows the total sales tax
    paid at the end of year and still makes it easy to keep track of paying my
    sales tax monthly.
    Wes, Mar 29, 2010
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  2. Wes

    Drmdcpa VIP Member

    Aug 2, 2017
    Likes Received:
    There is truly no such thing as sales tax expense. It is used by convention to make reporting and record keeping easier. Sales tax included in gross sales would be a more appropriate title.

    Sales tax is a liability since it is collected by or a factor of the amount collected from the customer. Even if your company does a promo stating no sales tax charged and they will pay the sales tax. Sales tax is still factored into the gross amount collected. Thus a liability. In such promo cases, the consumer is essentially being given a cash discount for the rate of sales tax.
    Drmdcpa, Aug 2, 2017
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