How do others recommend accounting for use tax on items purchased on which no tax was paid at time of purchase?
One question I have is do we want sales and use tax - after payment to a state - to show up on our income statement as an expense?
Let's say you had an expense for some batteries at $100 on which no tax was paid but should have been. One way to document the transaction would be:
$100 against the expense account for office supplies 8% * $100 = $8 to a liability account that accumulates the use tax to be paid quarterly $8 to a sales tax expense account
The liability account is cleared when a check is written to the sales tax authority.
This ends up netting to $100 ($100 -$8 + $8) and keeps the transaction in balance. but since we are on cash basis I don't think we can create an expense before a check is written. Can someone see a different way to do this that creates the expense at the time the liability account is cleared and the check is written to the state?