Chapter 6.3 Sales Tax Notes

Quiz review Journal Entry format includes –Date at top left (month and year), day is in left most column –A particulars column with account names and explanation –Debit and credit column Debit entry is always first, then credit entry is indented

Sales Tax Retail Sales Tax –Charged as a percentage of the sales price of goods In BC we pay HST on all items, as well as other items that have a specific tax; like gas tax, environmental disposal tax (paint) HST is 12% of the sale price

How do we account Taxes The Purchaser –Accounts for the taxes in the final sales slip as the total amount paid The Seller –How do you account for the sale when you do not keep the tax dollars as your revenue?

The Seller 1) Calculates the tax on the normal price 2) Collects the Tax 3) Accumulates the tax charged in a liability account…..(Why is it a liability account when they are collecting cash?) 4) Pays the tax to the government

Example Journal Entry Journal Entry for tax on cash sale DebitCredit Bank Sales Rev Sales Tax Payable 33.75

Remitting Sales Tax You now must have a sales tax account on your ledger –The sales Tax is accounted for as a liability account as money owing –The sales tax will be paid after a month of collecting and a entry will be made clearing the account of all taxes owed to the government.

Journal Entry at end of month for tax payable Remitting TaxDebitCredit Sales tax Payable100 Cash100 Tax remitted

Journal Entry for tax on Account Payable DebitCredit Office Supplies HST Recoverable A/P Supply Store