 can help you with the tax laws. We have the reports dropdown. You can also find these reports in the report center, but it's probably easier to see them here. And then you've got your tax accumulating per location. So for us, we set up the default 5% to Alabama and Colorado here, just randomly picking those two, and then you have the statuses of all paid, due, overdue, or open, and the amount and the status is open here. And then you have the tax year, the current year that we are on, and then the details on down below. Now, if you're using the sales tax, so that's the sales tax center. If I open this up, we then went into our sales tab and we went into our products and services. And in our case, we're saying that all of the actual inventory items are subject to sales tax, as you can see here. And we're saying that the service items are not subject to sales tax. Therefore, when I populate an invoice or a sales receipt that has an inventory item, it will charge the sales tax based on location, unless we say the customer is for some reason exempt from the sales tax and anything that's this type of item, like a service item, will not be subject to the sales tax. And the last step was to go into the customers, which you don't normally need to do unless a customer is special for some reason and would be exempt from sales tax or possibly have a different sales tax location than would be the default sales tax setting, typically driven by the sales tax setup and by the items. All right, so that's been set up now. If I go into, say, the balance sheet and I was to drill down on one of these accounts, going into it, we can see that their increase in the liability is increasing with invoices and sales receipts. If I go into those forms, these are the sales forms that we have, we can see the detail of the calculation. So you'll recall that when we enter an invoice, it increases the accounts payable by the total amount. And then the revenue goes up by this amount, the amount that we charged and the sales tax increases the payable account by whatever the sales tax is, in this case, 172.50. Remember that you could imagine a system, you might be thinking, why doesn't, why if we're gonna collect 3,622.50, I should record that as revenue and then record a business expense of sales tax. And that system would still result in the same net income and it's a question that will inevitably come up if you're a bookkeeper because the client is gonna say, hey, look, why don't I have something on my tax return if you're in the United States for sales tax expense because I'm spending all this money on sales tax. And the answer to that question is if you're using this system, that's because we didn't record the revenue on the income statement either, neither the revenue or the expenses on the income statement, we put it into a payable because the concept is that the government is saying, we're not actually taxing you business owner, we're taxing the client, we're just using you as the collection agency. Again, you can argue whether or not that is true from an economic standpoint, given the fact that we as the business have to basically increase our sales price. It looks to me kind of like we have a sales going up and a business expense of the sales tax for basically protection money that we're paying to the government so that we could pay for the cops so they can actually stop the people that keep looting our stores and stuff. But no, that's not how it works. So really we're charging the customer and therefore apparently the cops don't have to stop people from looting the stores or something or whatever. But so then let's close this out and let's go back to our report here. So then if you collect the sales tax from just a logistic standpoint now, now we have this money that we collected from the customer and of course we have to pay it to the government. And the question is well, how often do I have to pay it to the government? Which will hopefully be set up within the widget depending on the location as you set up your tax information. But usually what will happen is if you get a lot of sales the state or locale will want their money sooner. So you might have to pay it more regularly. And if however you don't have many sales then possibly the state's gonna go, okay we don't really care because you're not making much money anyway so maybe you just pay it once a year. For us we said we're gonna pay it monthly for the practice problem. So what does that mean? That means that we're collecting money for January. So we're gonna imagine January we collected our sales tax and then I'm in the payroll tax. The sales tax is up here. We collected the sales tax and then in February we also collected sales tax but we're gonna pay off just the January sales tax and then the February sales tax will be paid off in March. So there's gonna be a month lag of the sales tax. We collect the sales tax from customers using the sales forms, the invoice and sales receipts and then we pay off the liability that has been accumulating in the following month for the prior month as the current month keeps accumulating with the current month sales documents, invoices and sales receipts. All right, so let's go to the first tab and back into our tax over here. Now normally you would do that with like a widget in your sales tax and QuickBooks would make basically another type of form that would be another kind of expense, a check form decreasing the checking account but be specific to the sales tax. But because we're using a practice problem here we can't really do that because you have to run in real time for QuickBooks to basically calculate the tax that is owed. So we're just gonna do a manual check or a manual check here or an expense form but in practice of course you'd wanna use the little widget as the time passes when your tax is due. You can run the reports down here. We have a tax liability report, tax customer report, non-taxable transaction review. So clearly when you're looking at the liability you wanna possibly run the liability.