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The sales tax journal entry debits the accounts receivable or cash account for the total amount of the invoice or cash received, credits the sales account, and credits the sales tax payable account for the amount of sales taxes invoiced.
Sales tax is a tax levied by the businesses on customers when they buy the products and the services. The sales tax is then paid to the state or the local government within the certain time frame. This is why it is referred to as the pass-through tax.
One will debit the Sales Tax Payable account and credit Cash after the sales taxes have been remitted.
If a company purchases things from its suppliers and pays sales tax on them, the sales tax is charged to expenditure in the current quarter, together with the cost of the items purchased.
As a result, the sales tax journal entry debits accounts receivable or cash for the whole amount of the invoice or cash received, credits the sales account, and credits the sales tax payable account for the amount of the sales taxes invoiced.
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