[GNC] Sales Taxes...

[Eric H. Bowen]

Okay. With year-end coming up I'm not looking to make major changes in
the past, but I'd like to account for everything properly in the future.

Say I purchase $100 in printing supplies (paper, ink, etc.) from a local
vendor. The IRS wants me to account for taxes in the value of items
purchased. So I add an entry for $108.25 (8.25% local tax), and the full
value goes into my "Expenses:Business Expenses:Office Supplies" account.
Fine.

Now, suppose I purchase that $100 in supplies from an out-of-state
vendor who falls under the threshold for reporting sales taxes to Texas
(rhyming couplet there?) and so does not charge me sales tax on the
purchase. The law says that I have to pay a sales/use tax on the
purchase anyhow. Fine, I have a liability account set up for "Sales
Taxes Payable" which I normally use for the sales I make to customers;
once a quarter I total this up and send a check in to the comptroller.
No problem at all to do so with my online purchase, but the $8.25 which
I pay at the end of the quarter doesn't get added to my Office Supplies
purchase, as it should.

Finally, suppose I purchase the supplies from a local vendor, who
charges tax, but who grants me a "Net 30" for payment and so it goes
into my Accounts Payable as a bill. If I use the "Sales Tax Payable"
account/tax table for the purchase, my payment for the purchase goes in
as a payment on the liability, which is wrong. I can use a separate
sales tax table tied to a different account for purchases, in which case
it will be recorded as "Expenses:Business Expenses:Business Taxes:Sales
Tax Paid", but ideally the $8.25 should have been added to the value of
the purchase in "Office Supplies."

Is there a quick and elegant solution to this issue which I'm
overlooking, but that I could implement for next year?

-- 

--------Eric H. Bowen
eric at ehbowen.net <mailto:eric at ehbowen.net>