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BJTYRE1
July 20, 2018

Sales Tax & Income Tax

  • July 20, 2018
  • 2 replies
  • 0 views

I am fairly a new business owner and still get confused at times on the accounting side.  I have just started paying quarterly income taxes.  I also pay sales taxes on merchandise.  When I pay quarterly income taxes, doesn't this include the sales taxes I pay on merchandise?  I am confused am I overpaying.  Any advise is greatly appreciated.  I hope I am making sense.

      2 replies

      EmilyCowan
      EmilyCowan
      July 20, 2018

      Hey @BJTYRE1 - welcome to QB Community, and congrats on your new venture!

       

      It's totally OK to feel "confused at times on the accounting side." We've got plenty of QB Community members who rock at what they do - from chocolate-making to truck driving - and still feel stumped on stuff like tax questions. What's cool is that we also have a bunch of folks in our community who are rockstar accountants :smileyhappy:

       

      @LeahIlanah, @Peter_G_Stone, @JenPM - can you offer some clarification here?

      LeahIlanah
      LeahIlanah
      July 20, 2018

      Sales Tax is not revenue for your company. You are collecting this on behalf of the state where you made the sale, and it should be accounted for as a liability. And then you simply pay it to your Dep of Revenue when it's due.

       

      If your accounting system is set up correctly it will track sales tax separately from your revenue. 

       

      Does that make any sense what I am writing here?

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        BJTYRE1Author
        July 20, 2018

        Yes it does make sense.  Does Quick Books track sales tax separately?  I believe It only tracks  income tax separately.

          Peter_G_Stone
          Peter_G_Stone
          July 23, 2018

          Hi @BJTYRE1 great question and @JenPM & @LeahIlanah summed it up beautifully for you! They are two completely different things with no relation or effect on one another. Consider yourself a coin holder for the state you conduct business in regarding sales tax. At a future date you owe the state the money you are required to collect for the sales tax. QBSE has a feature where you can set up your state's sales tax and track what you owe. However, I do not believe you can pay it through QBSE. You should however be able to do so with more powerful versions of QBO and QBDT, so you may want to explore the other versions capabilities. 

          As previously described, your 1040 and state equivalent QES taxes are based off the net income of your business. I always suggest talking to a tax expert. While these forums are very helpful, they are not suitable for the complexities of tax law and planning because they are too general in nature. Best of luck to you!

            LeahIlanah
            LeahIlanah
            July 23, 2018

            Agreed in full.

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