State Sales Tax and Vendor's Compensation

jbra

Hi there Community! I need some help with "Vendor's Compensation" as it pertains to State Sales Tax. For those not familiar, here is the example:

• I sell something for $100 and charge 6% sales tax ($6)
• Then the following month when I go to pay the state their sales tax, they say I only owe them $5.75 (example) because I paid on time. They said the $0.25 is Vendor's Compensation for paying on time.
• So when the transaction comes into WaveApps it says $5.75, and NOT $6, which throws off all my Sales Tax amounts because of the $0.25.

So the question is: What do I do in WaveApps to make sure everything ties out correctly? I would appreciate any help on this as this is driving me nuts! I like a clean book and this is the only thing I am struggling with.

Thanks!

EmmaP

Hi @jbra! Thanks for reaching out and providing that context. It sounds like you could add a specific account for 'Vendors Compensation' and then set up a journal transaction to account for the 'discount'. However, it would be best to confirm the exact details of this with a bookkeeper or accountant!

Mikeg

@jbra,
In order to properly relieve the sales tax liability, vendor compensation needs to go to the income statement. You will need to create a journal entry. So let's say for example you collect 1025 in sales tax. Your state allows a discount of 25. You would cut a check for the 1000 but you have 1025 in liability on the balance sheet. You should
Debit Sales tax Payable 25
Credit Other Income 25
Transactions in Sales tax Payable
Credit 1025 (collection of sales tax)
Debit 1000 (payment)
JE debit 25 (journal entry)
Balance -0-
Hope that helps.

jbra

@Mikeg

Thanks so much, this helps me. I am adding a screen shot to see if you can help me a bit more on this issue:

So I sold an item for $100, and collected $6 (6%) Sales tax. Stripe sent me the amount (minus their fees) for a total of 102.63.

In WaveApps, I added that Sales Tax in there:

So now I am trying to figure out what I should do. The difference is $0.18 in the amount I collected ($6) and the amount I paid the State ($5.82).

Everything look ok here so far? I am confused on what I should do with the Journal Entry now. Which accounts would I select for those Uncat Exp and Uncat Income dropdowns?

Appreciate the help!

Thanks!

Mikeg

I'm assuming that the $6 was posted in the Sales Tax Payable account. Correct?

jbra

@Mikeg ,

Yes, I THINK so. I set up the sales tax code in WaveApps and it looks like it hits that when I run the Sales Tax Report:

Mikeg

Debit Sales Tax Payable .18
Credit Other income .18
By doing that you are relieving the entire 6.00. You had paid 5.82 but incurred 6.00 leaving an .18 balance. The discount the state is giving you is income. Looking at another way you collected 106.00 but remitted 5.82 leaving you a net deposit of 100.18.

jbra

Thanks so much @Mikeg - awesome help last week!