How important is it as a new business to record paid sales tax to a seperate account than the goods total?

Answer 1

It doesn't matter if you are a new business or an old business. Your accounting should be as accurate as possible. Plus, why wouldn't you record paid sales tax in a seperate account, it benefits your business.

Answer 2

I'm not sure if you're referring to your business collecting sales tax from customers or sales tax that you've paid for goods that you will sell. If it's sales tax you've paid to buy merchandise, then it's irrelevant. Now, if we're referring to sales tax collected by you from your customers, I think it would be a good idea to break down your sales tax receipts into a separate account. From an income tax standpoint, it doesn't make any difference, but from a management standpoint, the sales tax actually collected should be compared to the calculation of sales tax at the end of the month. For instance, if your sales taxable sales are $1,000, and your state sales tax rate is 5%, you should have collected $50 in sales tax. If you look at your actual collections and see that you've only collected $32, you're still on the hook to the state for $50. If you're somehow calculating sales tax incorrectly at the register, that's about the only way you would know that you're making a mistake: by comparing the sales tax calculation to the amount actually collected.

Answer 3

Not sure I understand what you're asking but I can tell you that if you want to claim the paid sales tax on your taxes you need to track it. I would suggest you consult a state and local tax accountant.

Answer 4

It's probably a good idea to have separate accounts, but not necessary if you have records of the gross and net amounts. You can figure out the taxes when you report them and then charge them to expense.

Answer 5

To expand on SuzeY's answer, if you collect any sales tax, then you are required to remit all of it to the state that you are collecting it. When you are audited for sales and use tax, if it is discovered that you did not pay over any tax that was collected, then you could go to jail for not remitting the sales tax that you collected.

You have to remember that any sales tax that you collect is NOT YOUR MONEY. You are just holding it for that state.

Answer 6

VERY. You want to pay the government twice?