Rustler’s Quickbooks Tips

In some cases including sales tax in your selling price can’t be done the way I suggested when I talked about an invoice. A prime example of that is a bar business. Bars sell drinks across the table and do not calculate sales tax separately.

But bars still need to pay sales tax on what was sold.

The math still holds as to how to calculate what part of sales is sales tax and what part is income (see the other post to see the math). But the reporting on the financial Profit and Loss Statement has to be different.

Normally sales tax is a pass through activity, you collect it, you hold it and you pay it. It is seperate from sales income.

When you run a bar it is part of gross sales, so when you back it out to pay sales tax to the state, you have to expense it. If you do not expense it, you are paying income tax on the sales tax you collected.

So when you calculate the sales tax owed on gross sales you need to make some journal entries. Debit an expense account called something like “Included sales tax expense” and credit “Sales tax payable” for the amount. That takes the sales tax paid to the state out of gross sales when the expenses are deducted on the P&L and shows what you owe to the state comptroller.