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Re: booking taxes when invoice is paid

On Sun, 21 Feb 2010, Chris Travers wrote:

So if I understand the problem:

You collect taxes from your customers on behalf of the government.  If
the customer never pays you don't have to pay the tax.  You only have
to pay after the customer pays.

(This is an acceptable way of paying sales tax in my state iirc. but
most businesses I know just pay on an accrual basis).

Ditto. Since I have chimed in on this, I'll answer your questions as well.

I have a few questions before submitting a workaround:

1)  Is everything you do taxed at the same rate?

I have two sales tax jurisdictions: a state and a city. The state has a fixed rate. The city also has a fixed rate. They rarely change, but can. Some customers pay both, some only pay one, and of course some pay none.

There are also rare services which are non-taxible, even to those customers. I would much rather deal with those "the hard way" than deal with this far more frequent problem under discussion in "the hard way", however.

2)  If not, how are partially paid invoices handled?

How *I* handle them, which may not be correct but nobody has questioned it, is to pay the taxes out of the first (collective) payment which covers them. The more correct way is probably what you suggested as quoted below--a partial payment for partial collection.

3)  Is it permissible to calculate taxes collected on, say, a monthly
basis and transfer those from an accrual account once per month?

For me it would be quarterly, but if I understand you, yes.

Either way, it seems to me that one would have to track how much in
the way of taxes were owed as per when the invoice was sent.  Then
when the invoice is collected, the taxes collected would have to be
tracked.  Does this make sense?

Yes, if what you're saying is that when a collection is made, the portion which is tax is determined in reference to the original invoice's tax data, not the currently in effect tax data.
That sounds correct.

In another message, On Sun, 21 Feb 2010, Chris Travers wrote:

Well, my thinking was this:

On "due after receipt" taxes, you would have two tax accounts.  Both
would be liability accounts.

The first would be a "tax uncollected" account, tracking tax on the invoice.

The payment would move the money from "tax uncollected" to "tax
collected."  The movement would be proportional to the portion of the
outstanding amount paid.

That sounds effective for my situation as well.