How to Record Sales Tax that you paid at the time of purchase

Modified on: 2017-11-29 15:53:58 -0500


As a designer you normally purchase merchandise at wholesale prices and since you would present the vendor with your sales tax license or reseller license, you would not pay sales tax.  However, there are occasions when you are shopping at retail stores, etc. where you buy merchandise and pay sales tax at that time.  You need to check with your CPA about how to properly handle this in your state/county.  Below is how we suggest recording these purchases if the cost (the price you paid to vendor) is to remain non-taxable while the markup or your profit is to be taxed. Again, you must contact your CPA to see how your state handles this as some states would require you to tax the full amount (cost + markup) even though you already paid sales tax on the cost.

  • Create your item and under the first component or the 'Merchandise' component, put the whole amount that you paid at the store (total + tax) into the Cost field.
  • Mark this component as non-taxable, since you already paid the tax on it.
  • Create a second component (also merchandise) to record your markup.  Set the percentage type to ?Fee? and mark this as taxable.

Note: When you do a PO, you would only run it for the first component and when you enter the Vendor Invoice (receipt) from the store for the item place the whole amount that you paid (total + tax) on the first component so you have it accurately tracked in your COGS.

Once more, we recommend checking with your CPA to see how he or she would prefer it be recorded.

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