Sales Tax Expense vs. Sales Tax Payable

[Wes]

Hi,

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
needed.

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.

 

[Drmdcpa]

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.