 Zero Accounting Software 2023. Pay sales tax. Get ready to become an accountant hero with Zero 2023. Here we are in our custom Zero homepage. Going into the file we set up in a prior presentation. Get great guitars. Duplicating some tabs to put reports in like we do every time. Right-click in the tab up top so we can duplicate it. Right-click in the tab up top so once again we can duplicate it. Back to the tab to the middle accounting drop down. We want to open up the balance sheet. Slightly modified balance sheet we did in the prior presentation. If you don't have that you can open the normal balance sheet. Tab into the right accounting drop down the income statement. But we're going to open the comparative income statement again. If you don't have that you can open the standard income statement. The comparative income statement however, comparing the current month February to the prior month January. The balance sheet has been slightly adjusted and that we have some account categories that we put down here with the custom layout down below. Alright, so now we're going to be dealing with sales tax and the pain of the sales tax noting that taxes are going to differ depending on your location. However, note that taxes in general aren't really new. In other words, governments have dreamed up every possible way that they could basically tax people throughout time. It's not like taxes themselves are new or the different kinds of taxes are new. It's just which tax a particular government is deciding to implement in whatever kind of location at any particular time that they think can milk the most money out of the people. That's the one that they're going to be going with. So we're talking about United States taxes here in terms of a sales tax which is basically a usage tax type of system. It's going to be applied on a state level as opposed to a federal level meaning every different state has to deal with their own and locality dependent state and local types of sales tax and the tax happens when we make the sale and then we of course have to collect the tax at that point in time and then give the tax money to the government periodically. Now we tried to make the taxes, the sales tax a little bit generic here just to give a general idea of a usage type tax, a sales types tax because we don't want to make it too specific for a particular location. It's also becoming, it's also a little bit difficult to track when the tax is paid or due when you're not working in real time using accounting software. So let's just think about, you know, let's look at the flow chart. First of all, this is a QuickBooks desktop flow chart but we're just looking in terms of the flow of forms and how the sales tax fit into the flow of the forms. Now the sales tax in theory is a government tax not on you, the business owner, but on the customer. That's what the idea is obviously in economic terms you can argue whether that is actually the case or not but that's the theory. So what happens is when we make a sale to a customer with either, you know, at the point of sale or with an invoice when we're billing the customer those are usually our sales forms or possibly we could have like a, you know, well those are the two sales forms usually we're collecting the money at that time or we have an invoice that we are creating then we're also going to be charging the customer the sales tax. Now the sales tax in theory isn't our charge and therefore we're not going to record it as revenue but instead as a payable type of account accumulating the liability at that time and then we're going to have to give that money to the government or whoever's whoever's giving us protection we're paying them protection money whoever's shaking us down, you know. So we're going to go back on over and see what that looks like. So if I go into say like the income statement and I go into our sales tab and let's drill down on the sales number to just look at a sales form to recall what this looks like and we're going to say let's say that in here we have an invoice let's just pick up an invoice at the beginning or here's a receive money form let's pick that one up. Alright so here's the sales tax on down below that's being calculated so what is this doing when we record it we have an increase to the sales that we charged which is this one thousand two hundred and the one thousand for a total of two thousand two hundred and that's what's increasing the revenue but we also had to charge this other in our case five percent which we broke out between local and state of the eighty eight and twenty two that's not going to go into revenue but rather it's going to go into a liability account and we're basically being forced to act as the tax collector in this case to collect that money so it's going to increase the liability account and then we're going to collect the two thousand three ten which is what's actually being deposited into our checking account. Now just note that you can imagine a system where you're going to say well why don't I just record the two thousand three ten as revenue and the sales tax is an ordinary and necessary expense of doing business and therefore I would just have an expense there instead of having this sales tax payable account being involved and one reason we don't do that in theory is because this amount isn't actually our revenue we're just collecting taxes it's supposed to be taxes on the client on the customer so we don't want to include it in revenue there now the reason that becomes important is because often times at the end of the year if you do taxes in the United States you often get this question from clients or yourself you're going to say hey I paid all this money to sales taxes why don't I have a sales tax expense account as a deduction for taxes you don't have it because we didn't record the revenue related to sales tax as taxes either both the revenue and the expense side having been reported on the payable account so you need to be able to explain that to yourself and others because the question will likely come up alright so then I'm going to go back and back and then if I go to the first tab here you'll recall we turned on the sales tax by going to the accounting drop down we went to advanced here and we went into the taxes and you could have the taxes based on your location but we just put in the taxes problem our generic 5% tax so it's a little bit generic in the problem so when you turn on the taxes you've got to turn it on by location that we did in a prior presentation and then you need to set up your items the things that you're selling which is your products and services business products and services and tell the system which of these products and services in our case we said the products the guitars are subject to tax so that when you make the sales forms the receive money forms and the invoices it will be able to calculate the tax as you create those forms that's the general outline note that some customers could be exempt from taxes in which case you might have to go to those particular customers and mark them off as exempt from taxes and those are the three things that you're going to have to do to set up the taxes now we've been collecting taxes so if I just go to the balance sheet I'm just going to look at this in terms of the balance sheet here I'm going to imagine that we have to collect the taxes for the month and then we're going to pay it at the end of the month so we've done two months of data input at this point in time so that means we collected taxes through January and I'm going to imagine we have to pay those taxes in February so if I scroll down for example to the liability account we've got the 4008 so if I go into the 4008 then this is how much we owe as of the end of February but I only want to pay up through January at this point in time that's what's due so here's the information for January and February so if I go and these of course are the invoices that are helping to generate actually this is the accounts table what am I doing back wrong number wrong number