I recently started doing the bookkeeping for a veterinary clinic, and I'm trying to clean up the books. One question I have is regarding sales tax payments. We don't track sales tax in quickbooks, but we file monthly and pay each month to the state agency. I get an invoice from the owner showing the taxable sales and tax payment due to the state agency. How do I correctly record this in quickbooks? Right now the payment is just posted to a sales tax liability account, which has a large negative number that just keeps growing with each payment. TIA
I can share another way on how to handle sales taxes in QuickBooks Desktop, @Denise-Cranford.
If you're not using sales in QuickBooks Desktop to accumulate sales tax liability, then there's no need to set up sales tax in QuickBooks Desktop. Instead, we can record a regular check and use an account to accrue the tax you owe. I'd suggest consulting an accountant on what posting accounts you'll need to apply when creating the transaction. Here's how:
Then, run the Transaction Detail by Account report to see the updated amount in the Sales Tax Liability account. Let me show you how:
Feel free to browse this link here if you need help with managing your company's financial reports. It'll route you to our general topics with articles.
You can always update us after trying the steps as I want to ensure this is resolved for you. Just leave a comment below and I'll get back to you. Take care always.
You can enter a bill and pay it. Enter a bill:
1) Enter your sales tax agency as the vendor (the state agency you send the payment to).
2) On the Expenses tab, enter your sales tax liability account on the 'Expenses' tab and the amount due.
3) Use the 'Memo' field to note which month's sales tax this applies to.
4) Save & Close.
5) Then, pay the bill.
In regard to the negative liability balance - you mentioned that you don't track sales tax in QuickBooks, but do you track total sales? I'm just trying to figure out what account to use as the offset to clear the negative sales tax liability balance.
We don't necessarily track sales. All of our income is entered as "cash deposit" or "merchant services deposit". The offsetting account is where I'm getting stuck too. I appreciate your help. And let me know if you need any more info so that I can try and resolve this. Thanks!
Out of curiosity, how many months or years of monthly sales tax payments have been accumulating in this sales tax liability account?
Just so I understand: the clinic records cash and cc deposits in QuickBooks as income?. Those deposits must include the sales tax collected, correct? If so, how is the clinic removing the sales tax collected from sales so as to not overstate the clinic's income? If sales tax is not being segregated from the deposits, the adjusting journal entry would be to debit (reduce) income and credit (increase) the sales tax liability account.