Sales tax collections and dispersal

[Allen Cogbill]

OK, I completely forgot that. Thanks.

A. Cogbill

On 11/2/2014 21:00, John Ralls wrote:
>> On Nov 2, 2014, at 7:04 PM, Allen Cogbill <acogbill at geopotential.com> wrote:
>>
>> I have what should be a simple problem, but I don't quite understand how to set up the transfer accounts properly. When I make a sale and collect sales tax, the funds are credited as follows:
>>
>> 1. Sale Amount credited to Checking (asset)
>> 2. Sales tax collected credited to Checking (asset)
>> 3. Sale Amount credited to "Sales" (an income account)
>> 4. Sales tax amount credited to "Sales tax" (liability)
>>
>> Later, when I actually pay the sales tax, I want to
>>
>> 1. Debit Sales tax amount from checking account, because the tax is paid from the checking acct
>> 2. Debit "Sales Tax" liability Account
>> 3. Credit "Sales Tax" expense account
>>
>> The problem is that the second operation does not balance. I don't want to expense the sales tax when it is collected, for it is actually paid at a later date.
> Sales tax that you collect on behalf of the State isn't an expense to you. It's the State's money, paid by the buyer, which you're holding onto for a little while.
>
> Regards,
> John Ralls