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 be recorded as a separate expense in the financial statements.
The visual below is a reminder that only a buyer would record sales tax expense. If you are a seller of good or services, you would not record any sales tax expense for the sale of those goods or services. Sales tax is a pass through cost for a seller.
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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 […]
What is the journal entry to record sales tax payable?
As you can see in the visual below, when a company collects sales tax from a customer, they would credit sales tax payable. Sales tax that has been collected represents a liability until the company remits the cash to the government. When a company collects sales tax, there is no income statement impact.
What is the journal entry to record sales tax?
Sales tax is a pass thru activity, which means that the company simply collects the sales tax from the customer and pass it on to the government. When the company sells and item and collects sales tax, the debit would be to cash, and the credits would be to sales revenue and sales tax payable […]