Overview
When you collect sales tax, that is money that you do not keep. Instead, all you're doing is collecting that money and then passing it to the government. When a company remits sales tax to the government, it simply means they are sending the cash to the government. So, how would you record this in DoorLoop?
Note: Please read this carefully before applying the steps to your account. This may or may not work for your specific needs and might need to be modified to work for your situation.
The Steps
Step 1 - Create a Sales Tax liability account
The first thing you'll want to do is create a Liability account for Sales Tax. You would do so in your Chart of Accounts.
To create a sales tax liability account, click Accounting on the main menu and then click Chart of Accounts.
Click the + New Account at the top right corner.
On the New Account window, enter the following information:
Type - select Liability > Other Current Liability
Account Name - you can enter Sales Tax.
Next, click the Lease Options tab and you'll want to toggle on "Use this account for Lease Charges."
Click Save to finish.
Step 2 - Charge Sales Tax on the Lease
This is something that will have to be calculated manually and added as a line item to your rent charge. For this example, rent is $1000/month so based on 7% sales tax, we added a line item for Sales Tax in the amount of $70. We added this as part of the Recurring Rent schedule so that it will post automatically each month and appear as the Rent Due amount each month on the tenant's portal.
Step 3 - Record Payment of Sales Tax to the Government
There are two ways you can record that you paid the Sales Tax to the government. You can either create a Journal Entry or an Expense. Both ways work, and they are listed below.
(Method 1) Record Sales Tax Payable as a Journal Entry
To record sales tax payable, you'll need to make a Journal Entry. 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 impact on the income statement.
Here, the journal entry should reflect a transfer from the Liability > Sales Tax account to Cash (bank account) when you transfer those funds out to give to the government.
You would enter this as a Debit to Sales Tax and a Credit to Cash (Bank Account).
(Method 2) Record Sales Tax to the Government as an Expense
To record an expense for sales tax paid out to the government, click the + Create New button at the top left corner. Then, click Expense under the Other Transactions section.
On the New Expense window, enter the following information:
Select Payee - Vendor > (government agency)
Pay From Account - select the bank account where the sales tax is held
Payment Method - enter the payment method
Property - select the property associated with the sales tax, the
Category - select Liability > Sales Tax account (or what you had named it as)
Amount - enter the total amount of sales tax you remit
Click Save to finish.
Disclaimer
The information provided is not offered by a licensed accountant, should not be considered accounting, financial, or legal advice, and is provided (and intended) for general informational purposes only. Do not rely on the information provided; rather, please verify applicable accounting laws and regulations independently. This information should not be considered a substitute for professional advice and does not offer Generally Accepted Accounting Principles (GAAP). The author and publisher are not liable for any damages or losses resulting from reliance on this information.