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Accounting: sales tax discounts
- Subject: Accounting: sales tax discounts
- From: Luke <..hidden..>
- Date: Wed, 27 Oct 2010 05:38:08 -0400 (EDT)
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
Therefore, there is a difference between amount collected, and amount
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.
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
Easier, but leaves those accounts un-reconcilable during the year.
Am I on the right track here?