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Are sales taxes from purchases an expense?

Hi,

This seems like a dumb question to me, but I am really unsure. Say I purchase and item and spend X dollars on sales tax. Does that X count as an expense, or should I use it to credit my sales tax payable account?

I'm not sure how an accounting program would do this. Is it normal to assume that sales taxes that you spend reduce the amount of sales tax that you must submit to the govt? Does this depend on the country? I am curious about the following countries: US, Canada, Australia.

Thanks! NL

Reply to
nicklang
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"nicklang" wrote

Sales tax paid on your purchases (other than inventory for resale) become an expense of that item and get treated accordingly. So, for sales tax paid on office supplies, just include that with the total cost of those supplies. For the sales tax paid on a piece of equipment, that gets capitalized and depreciated with the equipment over a number of years.

If you were to have paid sales tax on purchases that were for resale, then yes, take a credit for those sales taxes paid on your monthly sales tax report if your state allows for that.

Reply to
Paul Thomas, CPA

Reply to
TKnTexas

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