2007-11-19 12:19:06 · 5 answers · asked by banks 2 in Business & Finance ➔ Taxes ➔ Other - Taxes
Since you generally don't pay sales tax to the government as a seller right away, I would say that this would be the entry.
Cash
Revenue
Sales tax payable
Liability
2007-11-19 12:30:29 · answer #1 · answered by Dom 5 · 1⤊ 2⤋
It goes on your books as a current liability until you pay it to the state.
It's not revenue because you are never the legal owner of the funds, you are only a custodian of a trust fund for the state.
It's not an expense for you, again because you are only a custodian.
The posters who stated that it is a revenue neutral pass-through are correct. However it IS a liability as long as you hold the funds. When you collect sales tax, you DEBIT Cash and CREDIT Sales Tax Payable. When you cut the check, you DEBIT Sales Tax Payable and CREDIT Cash.
2007-11-19 20:27:46 · answer #2 · answered by Bostonian In MO 7 · 4⤊ 0⤋
Usually a liability, however, some states (California for one) allow business to absorb the sales tax as an expense of the business (Not charge sales tax to customers, but pay it themselves.) If the business does that, it is an expense.
2007-11-20 17:14:46 · answer #3 · answered by Mark S 5 · 0⤊ 0⤋
None of the above. As a seller, you are simply acting as the agent of the state, collecting from the buyer at the time of sale and then turning the collected funds over to the state according to the current tax schedules. This is a revenue neutral transaction. However, you DO get to keep any interest earned as income from the time you collect the funds until you disburse them to the state...
2007-11-19 20:27:27 · answer #4 · answered by rowlfe 7 · 0⤊ 4⤋
Neither, it is a "pass through"
2007-11-19 20:23:20 · answer #5 · answered by Anonymous · 0⤊ 4⤋