How to handle state sales tax and local surtax?
CottageOven
Member Posts: 21
In Florida (and many other locations), not only is there the state sales tax, but there are also other sales taxes (here, they're called "discretionary surtax") added by individual counties or municipalities .
For example, the Florida state sales tax is currently 6%, but Volusia County adds another 0.5% and Flagler County adds 1%. Thus, the effective sales tax is 6.5% for Volusia County and 7% for Flagler County.
Only a single payment is sent in to the state (no separate payments for the counties), and the form submitted includes the amounts of taxable sales and sales tax due for the state and each area that is not the home location of your business (e.g. in my case, even though I have sales in Volusia County and Flagler County, I would only list the state and Flagler County because my business is in Volusia County).
Given all of this, how would one create the appropriate taxes in Wave? Should I have two taxes - one for Volusia County for 6.5% and one for Flagler County for 7%, or should I have three - one for the state base sales tax of 6%, then one for the 0.5% surtax in Volusia County and one for the 1% surtax in Flagler County?
After those accounts are set up, would I then split the single payment to the state so that the appropriate amounts are also reflected for the counties?
Since I sell at farmers markets and don't use invoices, the way this would show up on invoices is not important to me, but people who do use invoices would probably also want to know how these taxes would show up on the invoices. They SHOULD only appear as a single line for the total sales tax amount and NOT as separate state and county amounts.
In the "feature-request" forum I have already posted a message about the need for the implementation of a table/bracket method for sales tax (which is required by Florida state law) but, again, that would not affect my use of Wave - only those who issue invoices and want their sales-tax amounts to calculate correctly.
Thank you.
Comments
@CottageOven,
Since you are not using Wave to help determine sales tax to collect you would have two options for presentation. Once would be to expense all payments to the state of FL (Sales Tax Expense) or treat the payment as a refund of sales. The reason being is that in your deposits (sales) the sales tax collected is included. Sales tax is neither an expense or income. Since you would have it included in your deposits you would need to negate the effect of the sales tax collected. You would just need a system to track sales tax collected by jurisdiction so that the forms can be completed correctly.
In other words, since I'm not using Wave for invoices, for me to categorize the sales tax payments that I have sent to the state I can choose "sales tax payment to government" and will need to create only a singe "tax" in Wave since the rate won't really matter because I'm only submitting to the state and don't need to keep separate categories for each county.
Is that correct?
Thanks.
@CottageOven,
I believe the Sales Tax Payment would want to apply that to a liability account. Since you are not posting sales tax via the liability account, I would just either expense under it's own account or classify the payment as a refund of sales.
Okay. Thanks.
Not a problem. Stay safe!