The "expense" account used for the sales tax that was paid on a vendor bill, would that be an "expense" or "COGS"? We're in a similar boat. The Wayfair court decision has changed the way some things are done in the dealer/vendor/customer transaction. Depending on whether a vendor has nexus in a state or not determines if tax is added to the dealer's cost, regardless of a resale cert on part of the dealer. As the dealer, if we are charged tax because of nexus, then we are allowed to pass on the cost of the tax to the customer, but not listed as a tax (listed as a "vendor paid tax incurred" or such). So now I have to account for sales tax to certain vendor bills that we incur, but I'm not sure how that needs to be accounted for, especially since we don't want to pay tax twice, once by us and once by the vendor. Example, we purchased product for a client in CA, and the vendor, although headquartered in NY, has nexus in CA. We were charged tax by the vendor which covers the tax liability for the gear for CA, then we charged the customer the amount of the tax as a separate line item, the gear being dropshipped. We used a "product/service" category for this line item, and it accounts to "Reimbursable Expenses", which now sounds incorrect. Not sure how to set this up. Would we want to use the same account for both the cost and income? Or do I need to set up separate accounts for what we're charged and what we charge out to the customer? And how would these differ, if so, from when we have to charge the customer taxes (even some 501(c)(3) customers thanks to the Wayfair decision) even if we were not charged taxes by the vendor? I understand your reply, but not sure what account to set up for the product/service line item to report to. And what account to create for the taxes paid to the vendor, assuming these two need to balance? Make sense? Thanks so much.