I have a problem with my Sales Tax and Tips Liability accounts that I have been searching for answers to for several months, to no avail. I hope someone here can help! There are multiple issues, all related.
1. My restaurant client receives income through both Square and DoorDash. Each month, I do a zero-dollar sales receipt to record the income and fees/adjustments reported by each system. Square reports Sales Tax and Tips collected in their report, but DoorDash does not report either. After much research, I think DoorDash is collecting and remitting sales tax, but this doesn't show up on the statements at all. Since no tax is reported on the statements, my client's tax preparer has been paying monthly sales tax on the total income, including what is reported on the DoorDash monthly statement. Are they actually paying double sales tax on the DoorDash?
2. Because I am only entering the liability for sales tax and tips for what Square is reporting, the additional amount of sales tax actually paid is higher than the amount I have in the liability account. I understand that I would need to do a JE to increase the liabilty accounts for the difference, but for the life of me, I can not figure out which account needs to be the other side of the equation. For example, DR Sales Tax Liability, but what account would I CR? I have already recorded the income in the original sales receipt, so putting it there would inflate the income and then it wouldn't match the income stated on the DoorDash Statement. The tips liabilities are paid out via payroll, but the amount paid out never matches the tips that Square reported, so that account also needs a JE, but I can't figure out the other side of the equation on that one either.
3. Lastly, and to make all of this even more complicated, the state allows merchants to retain a portion of the sales tax collected as long as they make their sales tax payment on time. I know I need to record that difference as other income (per the accountant), so yet another JE needs to be done. I know I need to CR the other income account, but what account should I DR? It seems like I would DR Sales Tax Liability, but first I would have to figure out the JE to get the sales tax difference added the liability account, per number 2 above.
I hope this makes sense. I have been looking at this for so long, and from so many angles, I can't see straight anymore, so I'm not sure if I am articulating this correctly.
If anyone has any idea how to help me figure this out, I would GREATLY appreciate it! This is affecting the financial statements, of course, and I need to get the financials delivered to the client soon. Also, if they are double-paying their sales tax, I need to let them know this too! Thank you in advance!
