"Fixed" Tax procedures

JimKusz

Hello:

I operate a VoIP telephone company in the US. Here, in addition to the traditional sales tax, I must also collect a $0.95/line tax. This amount is not connected in any way to the amount the customer spends on service, and should appear as a separate line item on their invoice.

Presently, I have a separate billing system doing the invoicing and payments, and am looking at options for wave. I am (or am trying, at least) to use Wave for my books for this company, so at the moment, my plan is to generate a manual invoice at the end of each month with the totals of that month's sales and such. So far, everything but the e911 tax has worked.

Since it is a tax, it is not income. The money does flow into my bank account, and back out to the government quarterly, just like a sales tax. I've reached out to Wave tech support, and they advised there's no direct way to accomplish this is Wave presently. So, I'm looking at "indirect" ways...

Would it be appropriate to create an "income" account for this tax, so I can create an item tied to it, and run my invoices, but then run a journal transaction to move that to a liability account? Would that even work? (I often get backwards on credits and debits; my skill set is a technology consultant, not an accountant!). Is there a better way to run this?

Thanks!
--Jim
Owner, NW Fiber, LLC (and others)

Mikeg

@JimKusz,
The easiest way to handle that is to expense the taxes you are remitting. The reason being is that it is included in your receipts. Like sales tax, it is neither income or an expense but since you have counted it as receipts then expensing the tax effectively offsets the tax contained in you're receipts. In December you may need to make an adjustment since the timing of collection and remittance usually differs.

Need assistance with books or taxes?