Proper Way to Enter Taxable Purchases

[Jean-David Beyer]

On 04/03/2014 06:48 AM, Maf. King wrote:
> On Wed 2 April 14 14:07:52 Donna Pfeifer wrote:

> If your sales tax works the same way as our VAT, then you would need an asset 
> account called something like "Sales Tax Paid on Purchases" and split the 
> purchase transaction between Expenses:Widgets and SalesTaxPaid.
> 

I live in New Jersey and there is a sales tax on most things I buy (7%)
and that tax is collected at the time of purchase. But in addition,
there is an end-use tax charged on things I purchase from out of state.
This is very confusing for several reasons:

1.) It is impossible to get an authoritative statement of which items
are taxable and which are not.

2.) Some out of state businesses collect New Jersey sales tax, and some
do not. Amazon.com collects the tax on some things and not on others.

3.) If you buy something out of state and pay their sales tax, the end
use tax in New Jersey is just the amount that New Jersey Tax exceeds the
tax you paid out of state.

So I have a liability account where I enter the end use tax due on out
of state purchases.
I have an expense account where I enter state sales tax.

When I file my state income tax return, I must put in a line item for
the end use tax that appears in my liability account. That gets paid
from my checking account.

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