[Date Prev][Date Next][Thread Prev][Thread Next][Date Index][Thread Index]

Accounting: sales tax discounts

For payment of sales taxes, I usually do a transfer involving checking, and the sales tax liability accounts.

Company is liable for sales tax in a state which permits a 1% discount for on-time/early payment.

Therefore, there is a difference between amount collected, and amount paid.

What are good practices for handling this?

I'm no accountant, but the two ways which came to mind for me were:

1. Add an income account called "discounts received" or similar, and make it a part of the transfer. Credit checking for the amounts actually paid to the state, and debit the tax liability accounts. Debit the tax liabilities for the discount, and credit to an income account (E.G. Discounts Received).

2. End of year version: do a bulk transfer of all extra funds in the sales tax liability accounts, into some income account, as a retainable earning.
Easier, but leaves those accounts un-reconcilable during the year.

Am I on the right track here?