How to record Use Tax liability?
mwphotography
Member Posts: 3
When I buy something online and don't pay sales tax, I need to set aside that tax so that I can make my quarterly sales and use tax payment. How to I record use tax as a liability so that I can create a report to tell me how much I owe each quarter? Once I have paid the government sales and use tax, how do I record that the liability is gone? Thanks for your help!
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mwphotography,
I don't believe there is a way to automate in Wave. Posting the liability would require a journal entry.
Debit Use Tax Expense (operating expense) and credit Use Tax Payable (short term liability). When you pay, classify the payment to Use Tax payable. You will need to create a way to track the amount owed. If you want to use Wave then you will need to be able to flag which items tax had tax already assessed and which ones did not. You could create a temporary expense account where purchases that do not have sales tax can be classified for the reporting period. Compute the tax based on the account balance and make journal entry mentioned above. Classify the amounts in the temporary account to appropriate expense. Another way would be to have a spreadsheet where purchases can be tracked. My suggestion would be to create a system that is easy to implement and track. You could even use the Marked as reviewed under the transactions page. Use the filter feature to group the transactions at reporting time. So for example, if you use the reviewed icon, then leave ones that need use tax paid as not reviewed or vice versa.
Keep me in mind if your looking for a CPA
Mike G, CPA
www.mgfinancial.net
Thank you so much!!!
Is there any chance that this might be simplified in the future? Seems convoluted to me.
It could be something that we improve in Wave in the future @IHSFL, but Mike gives a very solid explanation on how to action this in Wave. Perhaps automation is the way to go, but we still don't have any immediate plans as our product focuses lie elsewhere at the moment.
There's another thread asking the same question and I just posted a way to achieve this so that the Sales Tax & Balance Sheet reports show the Use Tax liability. It's a little/lot convoluted and we've just started using it but it works for us. Here's the other thread: [https://community.waveapps.com/discussion/comment/49993#Comment_49993]