Sales tax

[Questionguy101]

Do you add the sales tax to income and then claim it as an expense?

For example, gross sale is $10,000. Sales tax is $1,000 which, of course, has to be in turn paid to the Board of Equalization.

So do you report $10,000 as gross income and then claim $1,000 as expense?

Or do you just report $9,000 as gross income?

[KBTS]

Sales tax collected by a business is not income to them - it is a payable (and thus a liability). They are only acting as an agent for the taxing authority by collecting the tax and then remitting. You should not show it as income (or an expense) on the tax return.

[S T]

Usually true on reporting sales less sales tax - except that we are going to have a "huge" issue with the 1099K reporting, as the Credit Card Vendors are reporting the gross sales processed via crredit card which is including sales tax.

I have one client that always gives me gross including sales tax - then gives me the amount of the sales tax collected on sales and then gives me the amount of sales tax paid (which never matches due to the Quarters that it is paid in) It is a mess!

Sandy

[ChEAr$]

Usually true on reporting sales less sales tax - except that we are going to have a "huge" issue with the 1099K reporting, as the Credit Card Vendors are reporting the gross sales processed via crredit card which is including sales tax.

I have one client that always gives me gross including sales tax - then gives me the amount of the sales tax collected on sales and then gives me the amount of sales tax paid (which never matches due to the Quarters that it is paid in) It is a mess!

Sandy

I don't see any huge issue at all.

Report gross credit sales on appropriate line, and then on the other line report the difference between that and total net sales.

So we report correctly net sales. A side issue though is remembering to report sales tax discounts earned by the merchant as other income.