Example: Posting Sales Tax 
Example: Posting Sales Tax
Here is an example from both the seller's and the purchaser's view of how sales tax is posted. We assume that the seller is responsible for collecting and remitting the sales tax.
Sales Tax on Sales - Seller's Books
In this example, you are the seller. You are posting a sales order or an outgoing invoice. The price you charge the customer includes sales tax. The sales tax appears as a credit in your tax liability account. You remit the collected sales tax to the tax authorities.
The 2% cash discount is not reflected in posting of the revenue document. Cash discounts are recognized if the invoice is paid within the discount period.
Sales Tax on Purchases - Purchaser's Books
In this example, you are the purchaser. You are posting an incoming invoice. On the transaction the vendor charges a price that includes taxes.
The tax base amount may include or exclude cash discounts:
The cash discount is recognized at the time of payment with the original invoice being posted including the cash discount. Assuming the payment is made within the discount period, the payment program recognizes and posts the cash discount.
The cash discount is recognized when the invoice is posted. The anticipated cash discount is posted to a cash discount clearing account. When payment is made, the clearing account is cleared by posting to discount taken or lost account. An advantage is that the expense amount is lessened by the amount of the discount.
