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HB117
February 12, 2020
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Sales Taxes in P&L

  • February 12, 2020
  • 4 replies
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I paid Sales Taxes last January and they are reflected in my checking account, but they do not show up in my P&L. Current sales taxes do show in my balance sheet as current liabilities. Where would the paid taxes be, and how do I get them into my P&L?

Best answer by BigRedConsulting

Sales tax is a liability and as such transactions using that liability account don't appear on your P&L because it is neither income or an expense.

4 replies

BigRedConsulting
BigRedConsultingAnswer
February 12, 2020

Sales tax is a liability and as such transactions using that liability account don't appear on your P&L because it is neither income or an expense.

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    THansen
    September 15, 2020

    Sales Tax is a liability until paid. Then it goes through the P&L.

    H
    htb
    December 3, 2020

    this is true so how do I make it show on my P&L

     

    H
    HB117Author
    February 13, 2020

    Thank you, obviously I am not a CPA. I was looking at sales tax as a cost of doing business but I can see it as a current liability as well.

    MichelleBh
    MichelleBh
    February 1, 2021

    Thanks for joining on this thread, @kupcake999.

     

    I'll share some information about sales tax in QuickBooks Desktop. 

     

    Sales tax depends on the account type you use and its scenarios. Since the business is collecting sales tax on behalf of tax authorities, the tax is not recorded as a part of the revenue.

     

    For example: 

     

    You sell a bouquet worth $100 and has a 10% sales tax. With this, you need to separate the tax from the gross amount. You will debit for $110, then credit sales for $100, and sales tax payable for $10. 

     

    Sales Tax = Total Sales x Sales Tax Rate
    Sales Tax: 100 x 10/100 = $10

     

    Once the sales tax is collected from the customers, it becomes a liability for the business. The Sales Tax Payable is a liability account in the balance sheet that keeps track of the sales tax collected from the customers on behalf of the governing tax authority.

     

    The business holds these funds and is liable for remitting them to the government on a timely basis.

     

    I'd also suggest visiting this conversation and check IamjuViel answer for more example: Different scenarios involving sales tax. 

     

    I'd recommend consulting an accountant so they can explain this to you deeply about this matter. 
     

    Additionally, I've added an article about handling sales tax transactions and how QBO calculates the amount: Set up sales tax in QuickBooks Desktop.

     

    Let me know if you have other questions about sales tax. I'm always here to explain further. 

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    hdaalder
    March 8, 2022

    Hi, I believe I am able to follow most of what was discussed below, but I am still confused on how to get a correct P&L using quickbooks. I am not using quickbooks for invoicing, pulled all my income and expenses from the various accounts into quick books, categorized each of them and now I have the correct sales, COGS and expenses on the P&L, BUT because the sales incl. sales tax and I can't figure out how to tell Quickbooks to exclude those. Do I just manually adjust my sales transactions? I was hoping that either Quickbooks can use the 6.7% sales tax and automatically deduct that or I can manually enter a sales tax transaction for my sales (small company). Thanks for you help!

    JoesemM
    JoesemM
    March 9, 2022

    Thanks for joining this thread and sharing detailed information about your Sales Taxes in P&L concern, @hdaalder.

     

    You can create a sales tax adjustment to exclude those sales taxes. When it comes to deciding which account to adjust and how to enter the tax payment, I'd recommend consulting an accountant. They can help and guide you about this. This way, we can ensure that your books are accurate at the end of the month or year. 

     

    To create an adjustment: 

     

    1. Go to the Vendors menu, then hover on Sales Tax.
    2. Choose Adjust Sales Tax Due. 
    3. Set the Adjustment Date to today.
    4. Select the vendor and the adjustment account.
    5. Choose the adjustment calculation then enter the check amount. 
    6. Add a memo, then hit OK.

     

    If you need more help with adjusting your sales taxes, you can check this article for references: Process sales tax adjustment.

     

    Additionally, I've added these articles below on how to customize reports and troubleshoot sales tax issues in QuickBooks. 

     

     

    Don't hesitate to drop a comment below if you have other questions. I'm always happy to help. Take care, @hdaalder.

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    hdaalder
    March 10, 2022

    Thank you for your reply, but I do not have a Sales Tax in the 'Vendor' menu. Looks like what is populated are my 'Vendors' excl. my distributors.

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