Understanding taxes and the income statement

[Adrien Monteleone]

> On May 23, 2017, at 10:42 AM, Derek Atkins <warlord at mit.edu> wrote:
> 
> Hi,
> 
> doncram <doncram at gmail.com> writes:
> 
>> Just to confirm clearly to Pete.  What i did, which was to "edit the
>> invoice to show 20.00 for Consulting revenue with Taxable set and with Tax
>> included set to NO, and set Tax table = Consulting Sales Tax", and then
> 
> Are you sure you set Tax Included to "NO"?  With that setting gnucash
> should add the tax on top, which means at 7% on $20.00 you would get
> Income:Sales of $20.00 and Tax Withheld of $1.40, for a total in A/R of
> $21.40.
> 
> With Tax Included set to YES then it tells gnucash that the taxes are
> included in the $20 value so you'd get your $18.69 Income:Sales and
> $1.31 Tax Withheld, with $20 in A/R.

That’s the behavior I’m getting too in test invoices, which is why I noted to set to “yes” in my previous reply. Not sure how doncram’s getting the opposite effect.

> 
>> post it, created net income of 18.69 (which I could see in the Income
>> Statement)  and Sales Tax liability/payable of 1.31, and it created Account
>> Receivable of $20.00.   Then I further recorded receipt of $20 cash against
>> the invoice.  And then the Balance Sheet showed the $20 cash and the $1.31
>> of Sales Tax liability/payable.  Like you have been saying, the 1.31 should
>> not add to net income.  And like the others are saying, GnuCash can handle
>> it correctly.  So you must not be implementing it correctly.
> 
>> Please remember to CC this list on all your replies.
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> 
> -derek
> 
> -- 
>       Derek Atkins, SB '93 MIT EE, SM '95 MIT Media Laboratory
>       Member, MIT Student Information Processing Board  (SIPB)
>       URL: http://web.mit.edu/warlord/    PP-ASEL-IA     N1NWH
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