Jeremy/Bonnie Hellman on sat 4 feb 06
Chris,
You are correct. Sales tax collected in NOT revenue. It is money that you
collect on behalf of the taxing authority/authorities. Therefore, the first
line of your Schedule C, revenue, does NOT include sales tax collected. It
just does not appear at all on the Schedule C.
To be more accurate, I should have written:
"Deposits/sales on a tax return (minus any sales tax collected) should match
the business' bank deposits."
If you are keeping a full set of accounting books, you would increase your
cash in bank (a debit), and increase revenue (a credit) and increase the
liability "sales tax payable" (a credit).
What I would do when I make the deposit to my bank account, is split the
description between sales or revenue AND sales tax collected.
If I deposit $106, where $100 was my gross revenue/sale, $7 was sales tax
collected on behalf of the great state of _____ (fill in the blank), and $1
was the credit card fee, I would increase my cash by $106, but indicate that
$7 was sales tax collected (a liability that doesn't appear on my Sch. C),
and I paid $1 in credit card fees (an expense that does appear on my
Schedule C.
Sales tax collected and sales tax remitted to the state are not income or
expenses to your business.
BTW if you collect too much sales tax, you are still supposed to remit it to
your state. You don't get to keep it. If you collect too little sales tax,
you are supposed to pay the difference to the state, out of your pocket. If
you are ever subjected to a sales tax audit, you will be required to pay the
state whatever sales tax they consider you should have collected but didn't.
I would highly recommend that if a customer qualifies as exempt from sales
tax (such as selling to a retailer, where you are the wholesaler), that you
get a written/printed sales tax exemption, with the customer's sales tax
number, ID #, name, address, signature, etc. If you do not collect sales tax
because you directly ship an order to a state in which you do not have a
business presence, get some sort of proof of shipping, and save it at least
3 years, maybe longer.
Bonnie
----- Original Message -----
From: "Chris Schafale"
To:
Sent: Saturday, February 04, 2006 10:00 AM
Subject: Re: Fw: credit card use for group shows, now taxes
> At 07:08 PM 02/03/2006, Bonnie Hellman wrote, in part:
>
>>In general, it's a good thing on a tax return to show gross income, and
>>not
>>net out the income. Deposits/sales on a tax return should match the bank
>>deposits.
>
>
> This reminds me of a question that always comes up when I do my
> taxes. Since my deposits include sales tax I collected, where do I take
> that out on the Sched. C? I had previously read that I should subtract it
> out ahead of time, so that it does not appear on my federal return at
> all,
> since it is not really income to me, but Bonnie seems to be saying
> otherwise. Bonnie, how do you handle this?
>
> Chris
>
> ______________________________________________________________________________
> Send postings to clayart@lsv.ceramics.org
>
> You may look at the archives for the list or change your subscription
> settings from http://www.ceramics.org/clayart/
>
> Moderator of the list is Mel Jacobson who may be reached at
> melpots@pclink.com.
W J Seidl on sun 5 feb 06
Bonnie and all:
Most states now issue yearly to each "business" (read: collector of =
sales
tax) a certificate. It comes each year with the book(let) containing =
the
coupons that you use to submit your sales tax payments, or by itself in =
the
mail if you file your sales tax reports with the state electronically. =
In
the case of Florida, they also send a handy calendar that shows when you
have to file your reports for various taxes. Mine is taped to my =
monitor,
because I'm brain-dead and would forget otherwise .
In Florida (at least), you are required by law to photocopy the =
certificate
(as many as you need) and present a copy to the person/group/store from
which you are purchasing items "tax exempt" (or for resale to others). =
Of
course, if you are a government entity, military, a "recognized" =
organized
religion, or a state accepted not-for-profit (such as a 503(c)), you use =
it
all the time, and pay NO tax. If you are none of those, and using the =
items
purchased for personal use, or as a _part_ of a product which you then
resell, you are NOT allowed to purchase "tax-exempt". Using the =
certificate
properly whenever possible can save you hundreds or thousands of dollars =
per
year (if you are in a service business, depending on your business =
income
level.)
If you do not have one of those forms, contact your state's Department =
of
Taxes or Revenue (whoever it is that handles sales tax for your state) =
and
get a copy.
Well worth the time.
Wayne Seidl
-----Original Message-----
From: Clayart [mailto:CLAYART@LSV.CERAMICS.ORG] On Behalf Of =
Jeremy/Bonnie
Hellman
Sent: Saturday, February 04, 2006 3:47 PM
To: CLAYART@LSV.CERAMICS.ORG
Subject: credit card use for group shows, now taxes
Chris,
You are correct. Sales tax collected in NOT revenue. It is money that =
you
collect on behalf of the taxing authority/authorities. Therefore, the =
first
line of your Schedule C, revenue, does NOT include sales tax collected. =
It
just does not appear at all on the Schedule C.
To be more accurate, I should have written:
"Deposits/sales on a tax return (minus any sales tax collected) should =
match
the business' bank deposits."
If you are keeping a full set of accounting books, you would increase =
your
cash in bank (a debit), and increase revenue (a credit) and increase the
liability "sales tax payable" (a credit).
What I would do when I make the deposit to my bank account, is split the
description between sales or revenue AND sales tax collected.
If I deposit $106, where $100 was my gross revenue/sale, $7 was sales =
tax
collected on behalf of the great state of _____ (fill in the blank), and =
$1
was the credit card fee, I would increase my cash by $106, but indicate =
that
$7 was sales tax collected (a liability that doesn't appear on my Sch. =
C),
and I paid $1 in credit card fees (an expense that does appear on my
Schedule C.
Sales tax collected and sales tax remitted to the state are not income =
or
expenses to your business.
BTW if you collect too much sales tax, you are still supposed to remit =
it to
your state. You don't get to keep it. If you collect too little sales =
tax,
you are supposed to pay the difference to the state, out of your pocket. =
If
you are ever subjected to a sales tax audit, you will be required to pay =
the
state whatever sales tax they consider you should have collected but =
didn't.
I would highly recommend that if a customer qualifies as exempt from =
sales
tax (such as selling to a retailer, where you are the wholesaler), that =
you
get a written/printed sales tax exemption, with the customer's sales tax
number, ID #, name, address, signature, etc. If you do not collect sales =
tax
because you directly ship an order to a state in which you do not have a
business presence, get some sort of proof of shipping, and save it at =
least
3 years, maybe longer.
Bonnie
----- Original Message -----
From: "Chris Schafale"
To:
Sent: Saturday, February 04, 2006 10:00 AM
Subject: Re: Fw: credit card use for group shows, now taxes
> At 07:08 PM 02/03/2006, Bonnie Hellman wrote, in part:
>
>>In general, it's a good thing on a tax return to show gross income, =
and
>>not
>>net out the income. Deposits/sales on a tax return should match the =
bank
>>deposits.
>
>
> This reminds me of a question that always comes up when I do my
> taxes. Since my deposits include sales tax I collected, where do I =
take
> that out on the Sched. C? I had previously read that I should =
subtract it
> out ahead of time, so that it does not appear on my federal return at
> all,
> since it is not really income to me, but Bonnie seems to be saying
> otherwise. Bonnie, how do you handle this?
>
> Chris
>
>
_________________________________________________________________________=
___
__
> Send postings to clayart@lsv.ceramics.org
>
> You may look at the archives for the list or change your subscription
> settings from http://www.ceramics.org/clayart/
>
> Moderator of the list is Mel Jacobson who may be reached at
> melpots@pclink.com.
_________________________________________________________________________=
___
__
Send postings to clayart@lsv.ceramics.org
You may look at the archives for the list or change your subscription
settings from http://www.ceramics.org/clayart/
Moderator of the list is Mel Jacobson who may be reached at
melpots@pclink.com.
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