Print Friendly, PDF & Email

How to Handle Point of Sales Use Tax and Sales Tax

Question: How can we track sales tax paid on resale items at point of purchase and reduce the amount of sales tax we remit to our sales tax authority?

Scenario: You pay sales tax when you buy items for resale and you are allowed to reduce the amount of sales tax you eventually pay by the amount already paid. You collect the full amount of sales tax from your customers.

Answer: When you enter a transaction (like a Bill) for resale items, use the Expenses tab to select (or create) a COGS type COA that is only used to track sales tax expenses on resale items. Maybe call it “Sales Tax Point of Purchase”. Enter the amount of sales tax paid.

When you go to pay your sales tax, determine how much tax you have paid up to that point. Click the Adjust button. Select the same account used above. Select the “Reduce Sales Tax By” option. Enter the amount as a positive number. Click Save.

The Sales Tax Point of Purchase account will be a Cost of Goods Sold for the sales tax you are paying at point of purchase. When you remit sales tax collected, the sales tax adjustment amount will reduce that COGS.

Related Topics

Sales Tax and Use Tax FAQ