ACCOUNTS sales tax accounts?

Hello again ACCOUNTS advisors.

Could you please share with me exactly what accounts you use in your current accounting system for sales taxes? Even if you don’t record sales tax separately, please tell me that.

If you are in a jurisdiction where there are rebates on sales taxes, please tell me where you are, what the rebates are, and what accounts (and transactions) you use to handle them.

As always, you can reply by adding a Comment to this post, or by direct email.

Thank you.

8 thoughts on “ACCOUNTS sales tax accounts?

  1. I have a liability account for sales tax so my sales transactions look like this:

    DR Cash
    CR Sales
    CR Sales Tax Liability

    When I pay the sales tax

    DR Sales Tax Liability
    CR Cash

  2. In Ontario I use an HST paid on Purchases account in the expenditures, and an HST rebate account as Other Income. I use them both for our church and for our mission organization.

  3. In Ontario, as a charity, we are entitled to a rebate of our HST on the following basis:
    Federal portion of HST (ie 5%) – 50% rebate, ie 2.5% of the sales amount
    Provincial portion of HST (ie 8%) – 82% rebate, ie 6.56% of the sales amount
    So I have set up my accounting system to automatically split HST payments into four accounts:
    The first two are asset accounts, ie receivables:
    – Federal portion of HST – refundable (2.5%)
    – Provincial portion of HST – refundable (6.56%)
    These accumulate until the time to submit the request for the rebate (in our case, twice a year) and then the amounts are exactly what is needed to fill out the form.
    The second two are expense accounts:
    – Federal portion of HST – nonrefundable (2.5%)
    – Provincial portion of HST – nonrefundable (1.44%)
    These four percents add up to 13%, which is the current HST paid in Ontario.
    When the refund cheque is received, the entry is a debit in bank account and a credit to each of the HST refundable accounts.

  4. British Columbia – HST 12%
    Under Revenue I have set up an account – HST Refund
    Under General & Administrative Expenses I have set up an account – HST Paid on Purchases
    We are entitled to a 50% rebate on the the Federal portion and I’m not sure what the Provincial portion is.
    There is probably a better way to set this up but I just did it real simple.

  5. As a church we are in general exempt from sales tax. In those cases when purchases are made and the tax free number is not available the tax is recorded with the purchase, no separate account.

    • Thanks, Bill. A couple of others have told me this about the USA as well. I had no idea!

      It’s very different in Canada – we pay the sales tax like everybody else, but then we can claim a rebate of part of it (different amounts in different provinces).

  6. Thanks all for your replies. I’m clear now that this isn’t relevant for charities and churches in the USA, which are tax-exempt. I’ve written a longing Help page on Handling Sales Tax for those of you in Canada – it will be in the next beta test version.

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