Every city, county and state has different tax rules. It is recommended to take time to research the specifics of sales tax reporting in your state. Sales tax usually only applies when you are selling a tangible good or product. However, in some states, certain services are taxable as well.
Due to the vast amount of sales over the Internet, there is a drive to collect sales taxes for Internet-based sales. In addition to Internet sales, if your company operates in various counties then you’ll need to be current with how each county taxes sales as well as the different types of taxes based on the products being sold.
It pays off to be thorough in this matter. Unfortunately, changes in tax rules can happen frequently-monthly for city and county governments but only yearly for state governments. So keep current!
You need to have only one Sales Tax Collected Liability account on your chart of accounts. However, you will be using it to pay sales tax in different percentages to the city, the county and the state according to their tax laws.
Next, enter the amount of sales tax paid in the general ledger.
Here’s where good record keeping comes in. After you’ve paid the sales tax, attach any work papers, a copy of the forms filed with the city, county and state, and a copy of the tax check in your sales tax files. If need be, you have accurate records to prove your numbers.
Remember to always file your tax forms on time to avoid paying late fees.