Does sales tax impact the income statement?
It depends on whether you are selling the product or buying the product. As the seller, you would collect sales tax and remit to the government. There is no income statement impact when you are the seller.
However, if you are the buyer, you will likely be charged sales tax. When you are charged sales tax, you should record recognize the cash outflow for sales tax as sales tax expense in the income statement.
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How is sales tax calculated?
The amount of sales tax to charge a customer is based on the sales tax percentage rate multiplied by the total amount of goods purchased. For example, if a customer purchased $10 of goods, and the sales tax rate is 10%, then the company would charge the customer $1 ($10 x 10% = $1). That...
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What does it mean to remit sales tax to the government?
Sales tax is pass thru for the company, which means they collect the cash from the customer and then pass it along to the government. When a company remits sales tax to the government, it simply means they are sending the cash to the government. As you can see in the visual below, the money...
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What is the journal entry for a consumer to record sales tax?
As a consumer or buyer, you will likely be charged a sales tax on your purchase (note that some items are exempt from sales tax). For example, if you bought a glass of wine, part of your cash cost would be for the wine and part would be for sales tax. The sales tax should...
How is sales tax calculated?
The amount of sales tax to charge a customer is based on the sales tax percentage rate multiplied by the total amount of goods purchased. For example, if a customer purchased $10 of goods, and the sales tax rate is 10%, then the company would charge the customer $1 ($10 x 10% = $1). That...
What does it mean to remit sales tax to the government?
Sales tax is pass thru for the company, which means they collect the cash from the customer and then pass it along to the government. When a company remits sales tax to the government, it simply means they are sending the cash to the government. As you can see in the visual below, the money...
What is the journal entry for a consumer to record sales tax?
As a consumer or buyer, you will likely be charged a sales tax on your purchase (note that some items are exempt from sales tax). For example, if you bought a glass of wine, part of your cash cost would be for the wine and part would be for sales tax. The sales tax should...
