When making payments to vendors, you’ll need to track sales tax. It’s not uncommon for businesses to purchase goods and services from vendors. Vendors are business-to-business (B2B) companies that provide other businesses with essential goods and services needed to facilitate their money-making operations. If you use the QuickBooks accounting software, you can track sales tax for vendor payments in just a few easy steps.
Expense Sales Tax
Sales tax can be classified as an expense or liability depending on when it’s paid. If you pay it immediately — at the same time when you purchase goods or services from the vendor — it will be classified as an expense. If you purchase it afterward, it will be classified as a liability.
To track expense sales tax for vendor payments, launch QuickBooks and create a new expense account. Go to “Company” and select “Chart of Accounts.”In the new window, right-click and choose “New.” You can then choose “Expense” for the account type, and you can enter a name for the expense account. When you create a transaction, click the “Expenses” tab and select the newly created expense account.” You can then enter the expense sales tax in the “Amount” column.”
Liability Sales Tax
You can also track liability sales tax for vendor payments in QuickBooks. Rather than creating an expense account, though, you’ll need to create an other current liability account. To get started, click the “Company” menu in QuickBooks and select “Chart of Accounts.” Right-click anywhere in the new window and choose “New.” Click “Other Account Types” and choose “Other Current Liability.” You can then enter a name for the new liability account.
To track liability sales tax with this new account, create a bill and choose the “Expenses” tab for it. You should then be able to select the liability account. There should be an “amount” column. You can enter the amount of the liability sales tax in this column.
As a business owner, you can’t ignore sales tax payments to vendors. Sales tax, of course, is tax-deductible. To deduct it from your taxes, though, you’ll need to track it. Maybe you make expense sales tax payments to vendors, or perhaps you may liability sales tax payments to vendors. Regardless, you can track both types of sales tax payments in QuickBooks.
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