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Re: Accounting: sales tax discounts


On Wed, Oct 27, 2010 at 5:38 AM, Luke <..hidden..> wrote:
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

What are good practices for handling this?

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

I'm not an accountant either, so take this with a grain of salt:
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).

I think this would be the right way to do it -- it reflects the income for collecting
the tax when you earn it -- at remit time. If you leave it as a big bundle, you
aren't reflecting when the money was made.