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When would a company record sales tax expense on a purchase?

If you are a customer and purchase goods from a company, then you will likely be charged sales tax (there are some items exempt from sales tax). In this case, you should record sales tax.

For example, if you go to a bar and buy glass of wine, you might be charged sales tax. As you can see, when you go to record your purchase, part of the cost would be debited to sales tax expense.

If you are the company providing the good or service, you would not recognize any sales tax expense in your income statement. Only the a buyer of goods or services records sales tax.


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