Are sales tax payable current liabilities?

Sales Taxes Payable Sales taxes payable are current liabilities resulting from products and services sold to customers. Most states levy sales taxes, although they vary significantly on what is taxed and the tax rate.

How do you calculate sales tax payable in accounting?

To calculate the sales tax that is included in a company’s receipts, divide the total amount received (for the items that are subject to sales tax) by “1 + the sales tax rate”. In other words, if the sales tax rate is 6%, divide the sales taxable receipts by 1.06.

How do you reconcile a sales tax payable account?

Add the sales tax bills for the period to your sales tax payable balance; then subtract your sales tax checks. In the example, $5,000 plus $6,000 minus $8,000 equals an account balance of $3,000.

For what no sales tax is payable?

In many states, groceries and prescriptions are exempt from sales tax. In some, clothing is also exempt. Other types of goods that are not subject to sales tax include: Items purchased for resale to consumers.

Is sales tax payable an asset or liability?

Sales taxes payable. Sales taxes payable is a liability account in which is stored the aggregate amount of sales taxes that a business has collected from customers on behalf of a governing tax authority. The business is the custodian of these funds, and is liable for remitting them to the government on a timely basis.

Is sales tax an expense or a liability?

Sales Tax is not an expense or a COGS cost. The sales tax is a liability (something that you collected from a customer, but owe) to the government. You reduce how much you owe (from what you collected) by the amount you paid. At the end, your liability “should be” zero.

What is the accounting entry for sales?

In the case of a cash sale, the entry is: [debit] Cash. Cash is increased, since the customer pays in cash at the point of sale. [debit] Cost of goods sold. An expense is incurred for the cost of goods sold, since goods or services have been transferred to the customer. [credit] Revenue. The revenue account is increased to record the sale. [credit]. Inventory. [credit] Sales tax liability.

What is sales tax in accounting?

Sales Tax in Accounting. What is Sales Tax? Sales tax is a tax charged on the sale of goods and services and is usually administered by and paid over to the tax authorities. The tax is an indirect tax which is charged as a percentage of the selling price of the goods or services at each stage of its life.