Sales Tax Exempt Tracking and Self Paid Sales Tax
travis88
Member Posts: 18
I have a situation where I need to file quarterly sales tax reports with the state, which include all gross revenue, and then a deductions worksheet to show various tax exemptions.
I would like to include the sales tax on all invoices so that I can include them in the report on Wave, however, I also need a way to offset the taxes into an account that can be included in the report.
A real-world example of this would be as follows;
Sales and Invoicing
Invoice 1
- Product ABC for $100 subject to 6% sales tax
Invoice 2
- Product ABC for $100 subject to 6% sales tax
- Buyer has filed an agriculture/farm exempt form
- Reversal of 6% sales tax, as tax-exempt (still needs to be tracked)
Invoice 3
- Service XYZ for $100 NOT subject to 6% sales tax, as it is a farm service (still needs to be tracked as a sales tax deduction line item)
Invoice 4
- Product ABC for $100 subject to 6% sales tax
- Offset sales tax by "paying" for it myself, instead of allowing the customer to pay.
Sales Tax Filing
When filing my quarterly sales tax with the state, I need to input the following;
- Gross Revenue: $400
- Sales Exempt by Filled Farm Exemption: $100
- Sales Exempt by Non-Taxable Farm Services: $100
- Sales Tax Not Collected from Buyer: $6 (paid by seller only)
How is best to accomplish this in Wave? Ideally, I would have a summary as per the above.
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Comments
Hey there @travis88
We brainstormed a bit over this idea and to be honest, I'm not sure this is doable in Wave. At first I thought, I wonder if you should create multiple 6% sales taxes in the sales tax settings, but title them:
6%
6% reversal
Then just do a journal transaction to reverse the 6% on all those reversal tax transactions. They'll still be tracked in your reports, but the journal should offset the amount owed. Then I thought well if you credited the 6% reversal tax, which account would you debit?? I'm not exactly sure.
Also the key thing to note is that if you add a tax to an invoice, it will be added to the total amount of the invoice, which you client will be charged. So that's another reason why this wouldn't work. I would reach out to a CPA about this. But I can tell you that in Wave there is no way to add a tax exempt tax on your invoices. You would need to play around with journal entries to offset the amount.
Yeah, I feel like the only way to do this in Wave is to bypass all of the built-in tax processing logic, and create a new account/ledger for the taxes so that I can add them as line items, and just manually enter the amounts based on 6%. Way less than ideal, but it would make the reporting easier. Obviously I wouldn't be able to use the sales tax report in Wave, either.
@travis88,
A solution might be to create an Income each type of sales account mentioned above. For each service or product added under your invoicing, point that product or service to the appropriate Income account. Now when you fill out your sales tax return, the sum of all the sales accounts would be gross sales. You would have a breakdown of the other numbers to complete the rest of the info.
@travis88 Sounds like you might live in NJ! This is my same quandry.
@BarsinA
Has this changed recently in Wave? Seems that I can add tax to individual products on invoices so that sales taxes doesn't apply to whole invoice but rather specifc products? My use case would be selling products that are taxable and charging design services which are not taxable.