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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Finance
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Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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We have a home building business and a retail store that is

Resolved Question:

We have a home building business and a retail store that is at a different location and considered a separate cost center. We have sales tax payable on our balance sheet which is debited when we pay from the retail business cash account. We would like for sales tax to show as a cost for the retail store to analyze the profitability. What would the second entry be to show this?
Submitted: 1 year ago.
Category: Finance
Expert:  Megan C replied 1 year ago.

MyVirtualCPA :

Thank you for your question, and thanks for using JustAnswer.com. How are you today?

MyVirtualCPA :

Sales tax is not an expense to your retail location, as sales tax is actually paid for by your customers.

MyVirtualCPA :

So, when you receive cash for sales from customers, you debit cash and credit sales revenue for the sales amount and credit sales tax payable for the sales tax. Then, when you pay sales tax you debit sales tax payable and credit cash.

MyVirtualCPA :

This never becomes an expense for your business.

MyVirtualCPA :

Your customers pay sales tax, it is not your expense

MyVirtualCPA :

Do you have any questions about this matter?

MyVirtualCPA :

If not, please rate my response as "excellent" so that I may receive credit for assisting you today

Megan C, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 15588
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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