Sales tax expense

Question

Currently, Sage is booking sales tax on invoices as follows: 
 Debit A/R $107.25 
 Credit Income $100.00 
 Sales Tax Payable $7.25 
 
 When payment is received, checking is debited and A/R is credited for $107.25. 
 Is there a way to report the full $107.25 in income and expense the sales tax? Ohio gives a discount for sales tax timely paid. If I use Sage as is, I am going to continually have a credit in the Sales Tax Payable account, even when no money is due. 
 
 Thank you.

StephenC · Answer

The way it's being recorded is correct. Sales tax that you receive is not considered income. You are collecting it on behalf of the state so it is a liability to you. Similarly, when you remit sales tax to the state, it is not an expense. You are simply paying down the liability. 
 If you collected $1000 of sales tax and your discount for timely payment was $20, your payment should look like this: 
 Sales Tax Payable $1000 
 Cash $980 
 Other Income $20 
 
 When entering the payment you would have one line to Sales Tax Payable for 1000 and second to Other Income for -20. 
 You can ask your CPA is they want you to use Other Income, or some other account to record the discount.

Sage 50 US

Sales tax expense

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