handling taxes on bills

Posted by testforbc on March 9, 2009, 8:02 pm

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Say I receive a bill (incoming invoice) for $105. $100 for office
paper and $5 for local tax. I normally assign the expense of the paper
to an expense account, say office expenses. Is there any reason to
assign the tax ($5) in the bill to a different account than say the
paper itself or is it better to simply assign all $105 to the office
expense account.

Said in another way, is there any business reason I should care about
the taxes i pay on purchases and does QB do anything with them?

thanks
Ian

Posted by Laura on March 9, 2009, 8:11 pm

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> Say I receive a bill (incoming invoice) for $105. $100 for office

> paper and $5 for local tax. I normally assign the expense of the paper

> to an expense account, say office expenses. Is there any reason to

> assign the tax ($5) in the bill to a different account than say the

> paper itself or is it better to simply assign all $105 to the office

> expense account.

> Said in another way, is there any business reason I should care about

> the taxes i pay on purchases and does QB do anything with them?

> thanks

> Ian

Sales taxes paid on purchases are part of the cost. Just post them to the
same account as the rest of the items.

The only time you need to track sales tax is the ST collected from
customers.

--
Laura

Posted by testforbc on March 9, 2009, 8:51 pm

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> > Say I receive a bill (incoming invoice) for $105. $100 for office

> > paper and $5 for local tax. I normally assign the expense of the paper

> > to an expense account, say office expenses. Is there any reason to

> > assign the tax ($5) in the bill to a different account than say the

> > paper itself or is it better to simply assign all $105 to the office

> > expense account.

> > Said in another way, is there any business reason I should care about

> > the taxes i pay on purchases and does QB do anything with them?

> > thanks

> > Ian

> Sales taxes paid on purchases are part of the cost. Just post them to the

> same account as the rest of the items.

> The only time you need to track sales tax is the ST collected from

> customers.

> --

> Laura

Posted by Laura on March 9, 2009, 9:16 pm

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> > Say I receive a bill (incoming invoice) for $105. $100 for office

> > paper and $5 for local tax. I normally assign the expense of the paper

> > to an expense account, say office expenses. Is there any reason to

> > assign the tax ($5) in the bill to a different account than say the

> > paper itself or is it better to simply assign all $105 to the office

> > expense account.

> > Said in another way, is there any business reason I should care about

> > the taxes i pay on purchases and does QB do anything with them?

> > thanks

> > Ian

> Sales taxes paid on purchases are part of the cost. Just post them to the

> same account as the rest of the items.

> The only time you need to track sales tax is the ST collected from

> customers.

> --

> Laura

Thanks Laura.

How about for inventory items that I resell. If I pay taxes on those
purchases i think they can offset the sales tax we collect on our
sales (and ultimatley pass on). Is there some way QB manages this?
(FYI - we dont do this yet but I just want to understand it)

thanks
Ian
********

Most companies that purchase items for resale DO NOT pay sales tax on those
items--usually the customer pays the sales tax. In some states the reseller
pays the tax and not the customer.

I don't think that I have seen a case where both the reseller and the
customer paid taxes on the same item. You should check your state sales tax
rules to see what applies to your company.

QB is setup to track the sales tax collected rather than the sales tax paid.

Posted by EXT on March 10, 2009, 4:07 pm

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> >

> > > Say I receive a bill (incoming invoice) for $105. $100 for office

> > > paper and $5 for local tax. I normally assign the expense of the

> > > paper to an expense account, say office expenses. Is there any

> > > reason to assign the tax ($5) in the bill to a different account

> > > than say the paper itself or is it better to simply assign all

> > > $105 to the office expense account.

> >

> > > Said in another way, is there any business reason I should care

> > > about the taxes i pay on purchases and does QB do anything with

> > > them?

> >

> > > thanks

> > > Ian

> >

> > Sales taxes paid on purchases are part of the cost. Just post them

> > to the same account as the rest of the items.

> >

> > The only time you need to track sales tax is the ST collected from

> > customers.

> >

> > --

> > Laura

> Thanks Laura.

> How about for inventory items that I resell. If I pay taxes on those

> purchases i think they can offset the sales tax we collect on our

> sales (and ultimatley pass on). Is there some way QB manages this?

> (FYI - we dont do this yet but I just want to understand it)

> thanks

> Ian

> ********

> Most companies that purchase items for resale DO NOT pay sales tax on

> those items--usually the customer pays the sales tax. In some states

> the reseller pays the tax and not the customer.

> I don't think that I have seen a case where both the reseller and the

> customer paid taxes on the same item. You should check your state

> sales tax rules to see what applies to your company.

> QB is setup to track the sales tax collected rather than the sales

> tax paid.

If you have a copy of QB that is written for your area, it normally is
equipped to handle taxes according to the way the authorities require it to
be processed. For example we have a Federal Sales tax that is collected on
all goods and services, when you pay it you accumulate the tax paid and
subtract it from tax collected on sales, if you don't have enough sales tax
collected you get a refund. We also have a Provincial Sales tax that is only
collected on retail sales, all items purchased for resale are purchased tax
exempt. For items purchased as an operating expense, the cost of the item
and the tax paid is charged to the appropriate expense account.