Sales Tax

Sales tax you collect isn't revenue — it's money you hold for the state (or county, or country) until you remit it. Solid Accounting tracks it with tax codes and tax groups (Lists → Tax Codes) and reports what you owe on the Sales Tax screen.

The accounting

Invoice $100 of taxable services at 8%, and the tax goes to a liability, not to income:

DR  Accounts Receivable     108.00
CR  Service Income          100.00
CR  Sales Tax Payable         8.00

When the customer pays, cash replaces the receivable. When you remit, you debit Sales Tax Payable and credit the bank. At any moment, Sales Tax Payable should equal what you've collected and not yet remitted — check it each month.

Tax codes and tax groups

A tax code is one rate for one jurisdiction. In Lists → Tax Codes each code has a Code (for example CA-STATE), Name, Rate, Type (Sales, Use, GST, HST, PST or VAT), Jurisdiction, and flags for Compound and Exempt. Codes can be made inactive so they stop appearing in pickers.

A tax group bundles several codes that apply together. New York City is the classic case: 4% state + 4.5% city + 0.375% MTA = 8.875%. Pick the group on a line and every member code applies, so you can still report and remit each authority's share.

Compound codes are charged on a base that already includes other tax — rare in the US, found in parts of Canada and Europe. With 5% GST and a 9.975% compound tax on a $100 sale, the second tax is 9.975% of $105, not of $100. Mark the right code as compound and the math is done for you.

Exempt codes post a line at zero tax but record the exemption, which is what an auditor will ask about. Keep each exempt customer's exemption certificate on file; the app doesn't validate certificates.

Where the code comes from. An item can carry a default tax code (Lists → Items & Services), which fills in new lines; you can change the code on any line.

The Sales Tax report

Open Sales Tax in the sidebar (Expert Mode) and choose From and To dates. Two views:

By jurisdiction (filing) — gross sales, non-taxable sales, Tax you collected, and Tax marketplace collected, per tax-code jurisdiction. File your return from this view. Marketplace-collected sales (eBay, Amazon and other facilitators that charge and remit the tax themselves) belong in gross sales and the facilitated-sales deduction; you owe only the tax you collected yourself.
By ship-to state (exposure) — the same sales grouped by each document's ship-to state, to see which states you sell into. Professional and Accountant. New invoices prefill the ship-to state from the customer's shipping address.

Export CSV saves either view. If the tax on the report doesn't match how much Sales Tax Payable moved in the same period, a warning tells you the difference — resolve it before filing. Reports → Sales by State shows sales by state on its own.

Remitting

Run the Sales Tax report for the filing period.
Pay the authority with Write Check (or Pay Bill if you entered the return as a bill), coding the payment to Sales Tax Payable.
Afterwards, Sales Tax Payable for that period should be back to zero.

Use tax, VAT and other taxes

Use tax is what you owe on purchases where the seller didn't charge tax; use a code of type Use on those bills. GST, HST, PST and VAT work the same way as US sales tax, with their own type so they are reported separately.

Common problems

Sales Tax Payable keeps growing. The remittances were never recorded, or were coded to an expense. Record each payment against Sales Tax Payable.
Sales Tax Payable is negative. You remitted more than you collected — often a refund or credit memo that reduced the tax without a matching adjustment, or a payment that covered an earlier period.
A rate changed. Past invoices keep the rate you actually charged. Create a new code with the new rate, make the old one inactive, and use the new one from now on.
A code is missing from the picker. It's inactive.
The jurisdiction view shows only national totals. None of the sales in the period carry a jurisdiction. Set a jurisdiction on your tax codes before filing from it.

Accounts Receivable — invoices
Accounts Payable — bills and use tax
Month-end close