Dumb sales tax question....

Discussion in 'Business Operations' started by 1MajorTom, May 11, 2004.

  1. 1MajorTom

    1MajorTom Senior Moderator
    Posts: 6,073

    Ok here's my example.
    In the state of PA, we collect 6% sales tax. I send it in to them every month before the 20th.
    Here's an example using basic figures.
    Say for the month of April we make $10,000.00. I will send in the $600.00 by May 20th. But by the time the sales tax is due, we have actually only received $5000.00 in payments. That would be $300.00 actually collected/received in sales tax.
    Is it wrong that I am sending in the full amount even though we haven't gotten all the payments in? How is everyone else doing it? I never gave it any thought until now.
     
  2. JFGLN

    JFGLN LawnSite Senior Member
    Posts: 963

    It depends on your accounting system. You can count the money when you actually recieve it or when you make the invoices or statements( cash vs accural). You have to be consistent and stick with one method.
     
  3. 1MajorTom

    1MajorTom Senior Moderator
    Posts: 6,073

    Yes for 6 years I have always done it the same way. I've sent the whole total in even if we didn't actually have it all collected yet.
     
  4. specialtylc

    specialtylc LawnSite Bronze Member
    Posts: 1,656

    Its taxes on your sales, not what you have been paid. So you have to pay it monthly in Pa. ? Here we pay it quarterly. I send in the full amount before I have recieved all customer payments.
     
  5. 1MajorTom

    1MajorTom Senior Moderator
    Posts: 6,073

    In PA, it depends upon how much money you are making. In the 3rd quarter they check to see how much sales tax you are collecting. If it reaches a certain amount, they bump you up to monthly. Which totally sucks.
     
  6. JFGLN

    JFGLN LawnSite Senior Member
    Posts: 963

    I wouldn't consider it a sale untill I actually receive a check. This is called cash accounting. I have the Quickbooks sales tax payable account set up so it doesn't count the payments untill I receive the money. There is another form of accounting called accural-where you count sales as income at the time of the sale, before you receive payment. It doesn't matter which system you use as long as you are consistant. The federal taxes work the same way. How do you account for work preformed in December but you don't receive the money untill sometime in January?
     
  7. 1MajorTom

    1MajorTom Senior Moderator
    Posts: 6,073

    We don't work in December.
     
  8. Team Gopher

    Team Gopher LawnSite Platinum Member
    from -
    Posts: 4,041

    Hi 1MajorTom,

    Here is a quote from this site that may be helpful.

    "Sales Tax Payment Basis

    There are two ways to remit sales tax to the taxing authorities:

    · Accrual-basis method Means the tax is due when the customer is charged (the invoice date).

    · Cash-basis method Means the tax is due when the customer pays.

    Check with your accountant (and the taxing authority law) to determine the method you need to select. "
     
  9. little green guy

    little green guy LawnSite Senior Member
    Posts: 955

    I do it cash basis, so I pay on what I have recieved and pay monthly.
     
  10. LwnmwrMan22

    LwnmwrMan22 LawnSite Platinum Member
    Posts: 4,372

    In Minnesota you don't pay the tax for say.. April, until May 20th.

    I invoice at the first of the month, ie April 1st, for the work that's going to be performed in April, so when it takes 30-40 days, I've got my money by May 1-10, and therefore have the money to pay the state.
     

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