[GNC] How to accurately record Use Tax

[Christopher Lam]

No private email please.
I had detailed the posting of AP Bill in the future.

and post a bill, posting date is *01/12/2020*
01/12/2020 Use Tax due
Expense:Use Tax $15
A/Payable -$15

and in December 2020, clear the AP bill as usual.


On Tue, 25 Feb 2020, 4:55 am Brandon Captain, <caibbor at gmail.com> wrote:

> Thank you for your response, I still have a few questions.
>
> The problem that I see with your approach is that you've recorded the Use
> Tax as an expense at the same time that you've made the purchase, but it
> isn't an expense at that time. It's not an expense until you've actually
> paid it, and in my case it won't even be the same year - purchases in all
> of 2020 that I owe use tax on will be paid in March of 2021, and so on,
> every year. Inflating my expense account with money that I haven't spent
> yet is not representative of reality, and if I were to do it that way I
> would have to remember to subtract that amount when reporting what my
> *actual* expenses were.
>
> The best I've figured is the original plan, except (as you've suggested)
> to make my "future expenses" account of type Liability instead of type AP.
> So to be able to record the use tax as expense at a *future* time that we
> actually pay it, we have to create a sort of dummy account to hold it in
> until then, We can't stick it in Expenses because... it's not yet an
> expense. So I add a split to the original purchase transaction by adding
> the use tax amount owed as going from "Liabilities:Use Tax" (a credit) to
> the dummy account "Future Expense:Use Tax" (a debit). The only problem is
> that "Future Expense:Use Tax" now shows a negative. Then later when I
> actually pay the use tax, I create a transaction on the proper day that I
> pay the total sum of use tax I owe on all my purchases: I credit whatever
> asset account I pay it with and debit the "Liabilities:Use Tax", then add a
> split to it that credits "Future Expenses:Use Tax" and debits Expenses.
> Thus bringing the "Future Expenses:Use Tax" and "Liabilities:Use Tax" to
> zero, and raising Expenses on the proper date. "Future Expenses" has to be
> a top-level account, because if we stick it into "Liabilities" then it
> "Liabilities" is just going to balance those two figured out to zero.
>
> Thoughts?
>
>
>
> On Sun, Feb 23, 2020 at 6:06 PM Christopher Lam <christopher.lck at gmail.com>
> wrote:
>
>> For your use case you could use AP accounts and bills.  Let's assume your
>> use tax is 15% to be cleared in December 2020.
>>
>> I'd think, during purchase
>> 24/02/2020 Buy something, will also need to pay use tax
>> Expense:MI Use Tax +$100
>> Asset:Bank -$100
>>
>> and post a bill, posting date is 01/12/2020
>> 31/12/2020 Use Tax due
>> Expense:Use Tax $15
>> A/Payable -$15
>>
>> and in December 2020, clear the AP bill as usual.
>>
>> ---
>>
>> You could also do it manually without using AP/AR accounts
>> 31/12/2020 Use Tax due
>> Expense:Use Tax $15
>> Liability:Future Use Tax -$15
>>
>> and in December 2020, clear the Liability account.
>>
>> ---
>>
>> > Other payable accounts you create should be of type ‘liability’ and
>> you can manually enter stuff there all you want. (there can be only one
>> account of either *type* AP or AR)
>>
>> You can actually have as many AP/AR accounts as you like, in different
>> currencies too.
>>
>> On Sun, 23 Feb 2020 at 01:47, Brandon Captain <caibbor at gmail.com> wrote:
>>
>>> I make purchases for which I owe state Use Tax on. It's important for me
>>> to
>>> record the Use Tax liability at the time it becomes a liability, but only
>>> record it as an expense at the time that I pay it.
>>>
>>> I have several accounts for this, but the important ones are:
>>>
>>> * "Future Expense(A/P):MI Use Tax", a top-level Accounts Payable account.
>>> * "Expenses:MI Use Tax"
>>> * "Liabilities:MI Use Tax"
>>>
>>> When I make a purchase that I owe use tax on, I make a split transaction:
>>> * decrease an asset account by the amount I paid, and increase the
>>> expense
>>> account by the amount I paid (not including the unpaid use tax).
>>> * increase the "Liabilities:MI Use Tax" and increase "Future
>>> Expense(A/P):MI Use Tax"
>>>
>>> In the next year when I remit the Use Tax to my state, I create another
>>> split transaction for the amount I pay in use tax:
>>> * decrease whatever asset account, and decrease "Liabilities:MI Use Tax"
>>> * decrease "Future Expense(A/P):MI Use Tax", and increase "Expenses:MI
>>> Use
>>> Tax".
>>>
>>> This method allows me to keep the Use Tax that I pay recorded in the
>>> proper
>>> year - I can't record it as an expense at the time I buy the item,
>>> because
>>> I haven't paid that portion of it yet, and I don't want to have to
>>> remember
>>> that come next tax season.
>>>
>>> I am not using the default "Liabilities:Accounts Payable" account because
>>> it would negate "Liabilities:MI Use Tax", and would always look like I
>>> have
>>> a zero tax liability which would be incorrect.
>>>
>>> So this setup seems to work, but I'm unsure about the GnuCash
>>> documentation
>>> which says: "Transactions involving an Accounts Payable account should
>>> not
>>> be added, changed or deleted in any way other than by using post/unpost
>>> bill/invoice/voucher or process payment"
>>>
>>> I don't use the payment system (yet), but why is it such a problem to
>>> manually enter A/P transactions?
>>>
>>> Is it really that important that I use the bill/payment system for these
>>> transactions? And once I do so, can I safely split them afterward?
>>>
>>> Thank you
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>>