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    10 Replies Latest reply on Apr 28, 2008 5:23 PM by nytaxguy

    Sales Tax Account

    Buffalo Adventurer
      It's sales tax time again...yuk. I would like some opinions on this...do you keep a seperate bank account for your sales tax? In other words do you move money to a special bank account weekly or monthly or whenever so that it is seperate from your operating capital?
      I think that would give me a more realistic picture of the money that is "mine" and the money would be there for payment.
      Any thoughts would be appreciated! Thanks.
        • Re: Sales Tax Account
          LUCKIEST Guide
          Yes, Sales tax rolls around every 3 months in New York. As you know sales tax is NOT income.
          You collect the tax and then pay it to the State. Do you have an Accountant?? Are your books on
          a business program like quickbooks or a spreadsheet. As you know I am a quickbooks consultant and
          quickbooks does NOT show sales tax as income. It gets posted to the sales tax liability.
          To me, it would seem like more work to move the sales taxmoney to a special bank account whenever.
          BUT everybody is different. Do what gives you the best picture.
          LUCKIEST
            • Re: Sales Tax Account
              nytaxguy Wayfarer
              You can report sales tax as income if you choose. You can then record sales tax paid as an expense. For NY Sales tax reporting sales tax included in sales is backed out to report taxable sales to NY. This is usually fairly easy to do for a NY only company and not too many counties.
            • Re: Sales Tax Account
              Lighthouse24 Ranger

              Sales tax collected (but not yet paid to the state) is not kept in a separate bank account, but is in a separate account in the books -- and the business' books are what give you (or anyone) the most accurate picture of the money that is "yours." Hope this helps. Best wishes.
              • Re: Sales Tax Account
                DomainDiva Ranger
                The answers given are totally correct...but I sense something personal and visual as well in this question, and that is how you personally view what is actually YOUR money, or money that is available to the business. You like to be able to LOOK at something...an account journal or register and KNOW immediately where you stand instead of having to check through journal ledgers and reports to get things broken out for you.

                It really is OK to have a sales tax account if thats the way you want to do it. Just be sure to make the proper notations in your Quickbooks ledgers. Your accountant needs to know how you are setting this up as well.
                1 of 1 people found this helpful
                  • Re: Sales Tax Account
                    LUCKIEST Guide
                    DD, Everybody (and every Accountant) looks at their books and records differently.
                    Lets think BIG (like a Department Store) that does thousands(or Hundreds of thousands) of sales a day.
                    A sale is made up of three items. A debit to Cash or receivable (lets say $104.), A credit to the Sales Tax
                    Liability (say$4.) and a credit to Sales for the balance ($100), multiplied by every sale.
                    With computers and accounting systems you KNOW immediately where you stand.
                    Set your books up as you like. That is why there are Sales Tax Audits.
                    LUCKIEST
                      • Re: Sales Tax Account
                        DomainDiva Ranger
                        Visual learners that are not accountants LOOK at things differently, thats the key to the original question. Being able to LOOK in one place and immediately have the information DESIRED at that time. Its very strange because visual learners have to relearn things when keeping books and these things are not always easy. Trust me..I am a visual learner. :) and I am NOT an accountant. When I first got started with Quickbooks I would sit at my computer and cry! I drove my accountant nuts with the questions...what was easy for him...was convoluted for me.

                        I have been audited by the Texas Workforce Commission just because they wanted to not because of then way I kept my books. As a matter of fact...they were very impresed with the record keeping.
                      • Re: Sales Tax Account
                        Buffalo Adventurer
                        DomainDiva you are absolutly correct!! I look at my bank account and see money but I know that it isn't all mine because some of it goes for sales tax and other expenses. I understand all the accounting aspects of sales tax.
                        Mostly my question was do people set aside cash in a seperate account to pay sales tax. They know the money will be there when it's time to pay the taxes and they will also have a better idea of how much money is actually "theirs".
                        Thanks for all the answers!!!
                      • Re: Sales Tax Account
                        fandmsearch Newbie
                        Sales tax is paid seperately. I keep it in my business account. Every three months it is taken out and submitted to the for payment. It's easier to keep it seperate and pay it frequently rather then take a chance of it adding up or not getting paid at all. My accountant helps keep it all seperated and properly maintened.