What is sales tax payable? How does sales tax payable work?


I don’t understand what exactly is sales tax payable? How pays this tax, what are the rates and how exactly should I include it in the products or the services that I sell?

Category: Tags: asked December 2, 2012

1 Answer


Sales tax is the tax that the consumer needs to pay for the purchase of goods or services. The sales tax is collected by the vendor which is then paid to the state. Each state in the US has different tax rates. Since the sales tax has been collected, the company debits the cash and makes two credits. The first credit is in the income statement and more specifically the revenue and the other credit is in the sales tax payable which is a current liability. The treatment is the same as the VAT in other parts of the world.

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