How To Make Pay Sales Tax Use Accrual Method?

[CHANGE username to westes]

As a company we are still on cash basis, but the wonderful bureaucracy in
our state requires sales tax to be done on an accrual basis. That's not a
problem for calculation, since the Sales Tax reports can be modified to be
on accrual basis. When I go to pay the tax however it refuses to give me
any choice between cash and accrual methods, and because the company file is
set to cash it defaults to cash basis. That gives the wrong number for the
check.

Is the solution to have the check be written manually to the correct dollar
amount selecting the Sales Tax Payable account and then to enter a split
with the remaining amount for the check coming from any use tax as
calculated in a Sales Tax Payable Adjustment account?

If there is a way to work with the internal Pay Sales Tax feature I would
rather do that, but if I cannot I want to understand what implications if
any there are as a result of not having the payment processed as the type
"TAXPMT" by Quickbooks.

--
Will

[HeyBub]

Will wrote: As a company we are still on cash basis, but the wonderful bureaucracy in our state requires sales tax to be done on an accrual basis. That's not a problem for calculation, since the Sales Tax reports can be modified to be on accrual basis. When I go to pay the tax however it refuses to give me any choice between cash and accrual methods, and because the company file is set to cash it defaults to cash basis. That gives the wrong number for the check. Is the solution to have the check be written manually to the correct dollar amount selecting the Sales Tax Payable account and then to enter a split with the remaining amount for the check coming from any use tax as calculated in a Sales Tax Payable Adjustment account? If there is a way to work with the internal Pay Sales Tax feature I would rather do that, but if I cannot I want to understand what implications if any there are as a result of not having the payment processed as the type "TAXPMT" by Quickbooks.

Huh? The entire sales tax is due when you sell the item. If you, for
example, finance a car for 48 months, the state nevertheless wants ALL of
the sales tax NOW, not over four years!

In an accrual system, when you sell something, you've sold it irrespective
of when you get paid and it is this sale for which the state wants its cut.
To restate, you owe the tax even if you never get paid! (There may be ways
to get your money back from the state in cases of a deadbeat.) And you
cannot pro-rate the tax collected/remitted over time.

Is it the case that you're on a cash basis but allow your customers to pay
over time? (!) That's going to be really confusing.

What you COULD do, I guess, is sell PART of the item each month (doors,
hood, engine, etc.), taxing as you go. Nah, that won't fly.

[CHANGE username to westes]

You are just restating the premise, not answering the question. The
Quickbooks question of interest is how can you force the Sale Tax Payment
function in Quickbooks to act on an accrual basis when the business is on a
cash basis? On our system, Quickbooks performs the Sales Tax Payment
function on a cash basis, and I assume that is because the company books are
set to cash. This is a case where Quickbooks should give you a choice,
because sales tax reporting rules have no relationship to what your own
reporting basis is.

I would like to keep the focus on the Quickbooks question as stated above,
but as a matter of fairness, what the State does by collecting on an accrual
basis doesn't strike me as fair, and it certainly is NOT pro-business. The
State wants to collect tax before the business collects the tax. As a
matter of cash flow alone, that can only hurt businesses. You sell a
$100K computer and incur a $8.5K sales tax on that sale. State collects
its $8.5K right up front. Now the business to whom you sold this stalls
payment for 60 days and then short-changes part of the payment. The State
wants you to prepay what you haven't even been paid, then it wants you to go
through hoops later to explain why you get some of that money back on a
later sales tax return. If you are on a quarterly cycle, you can easily
end up stretching out your partial recovery of the overpayment to six
months. Common sense tells you that a certain number of businesses will
fail simply because of the burdens that unbalanced cash flow places on them.
The State loses revenue from those businesses failing as well, but my
general impression is that most State governments are filled with extremely
stupid people who are not even conscious about what a business is or what it
requires to thrive, and seem to act like businesses are money trees that
exist only to help them cover up their inability to balance their own
government budgets. :) The example you use is with a car loan is bad,
because in a loan situation the seller is paid in full by the lender up
front. In fact most long term leases or loans *accelerate* cash flow to
the seller, not stretch it out. It is a lender - NOT the seller - who must
deal with cash flow issues for that example. The lender is not responsible
for paying the tax, and the lender makes a percent on the loan itself, which
already includes the sales tax (i.e., they are in the business of making
money when people do delay paying a capital purchase amount).

As one example of this government-bred stupidity: Consider that a small
business with about $100K in cash assets cannot make a $3M sale with a long
payables cycle at the end of the sales tax reporting period without wiping
out all of its available cash and throwing the company into disarray. Is
the State better served by bankrupting the company and accelerating one
miserable payment by 30 days, or is the State better off by creating the
conditions in which the company can continue to make $3M sales repeatedly,
each of those generating more revenue for the State? The fact that a State
government would prefer to throw businesses into cash flow disarray rather
than creating conditions for their continued success shows just how
short-sighted most State governments are, and how they fundamentally don't
understand the environment they regulate at all. The behavior is
defensible only if your definition of the long term is 30 days.

--
Will


"HeyBub" <heybubNOSPAM@gmail.com> wrote in message
news:11mdlk7mnsvf4c0@news.supernews.com... Huh? The entire sales tax is due when you sell the item. If you, for example, finance a car for 48 months, the state nevertheless wants ALL of the sales tax NOW, not over four years! In an accrual system, when you sell something, you've sold it irrespective of when you get paid and it is this sale for which the state wants its
cut. To restate, you owe the tax even if you never get paid! (There may be ways to get your money back from the state in cases of a deadbeat.) And you cannot pro-rate the tax collected/remitted over time. Is it the case that you're on a cash basis but allow your customers to pay over time? (!) That's going to be really confusing. What you COULD do, I guess, is sell PART of the item each month (doors, hood, engine, etc.), taxing as you go. Nah, that won't fly.

[Golden California Girls]

Will wrote:
You are just restating the premise, not answering the question. The Quickbooks question of interest is how can you force the Sale Tax Payment function in Quickbooks to act on an accrual basis when the business is on a cash basis? On our system, Quickbooks performs the Sales Tax Payment function on a cash basis, and I assume that is because the company books are set to cash. This is a case where Quickbooks should give you a choice, because sales tax reporting rules have no relationship to what your own reporting basis is.

From what I remember the Macintosh v 5 did not act as you describe. It always
assumed accrual basis for sales tax throughout.

Anyway, you can always go edit the company preferences, change your tax basis,
do your sales tax transaction, go back to the company preferences, change yous
basis back and move on. Sucks, but that is Quickbooks!

As for not using a pay sales tax transaction, you write a regular check you get
a warning box. Next time you do a sales tax report you'll have an other line
on the form for the payment. At some point if you want to get rid of the other
line, pay sales tax and pay it with the credit from the other line, generate a
zero dollar sales tax payment. BINGO gone-o.

[CHANGE username to westes]

"Golden California Girls" <gldncagrls@aol.com.mil> wrote in message
news:436716C4.C51ADE35@aol.com.mil... Anyway, you can always go edit the company preferences, change your tax
basis, do your sales tax transaction, go back to the company preferences, change
yous basis back and move on. Sucks, but that is Quickbooks!

In researching your suggestion, now I see there is a company preference
option for sales tax that lets you pay on the accrual basis. So the
feature was in fact there and I missed it.

I much appreciate your suggestion in any case.

--
Will

[Allan Martin]

"Will" <DELETE_westes@earthbroadcast.com> wrote in message
news:zJWdnYTYyLWKbvveRVn-hA@giganews.com... You are just restating the premise, not answering the question. The Quickbooks question of interest is how can you force the Sale Tax Payment function in Quickbooks to act on an accrual basis when the business is on a cash basis? On our system, Quickbooks performs the Sales Tax Payment function on a cash basis, and I assume that is because the company books are set to cash.

Ok, I will deviate from my normal respose to your multitude of questions
just today. There is an option in the sales tax section of preferences that
allows you to change from cash to accrual for determining sales tax
liabilitiies.





This is a case where Quickbooks should give you a choice, because sales tax reporting rules have no relationship to what your own reporting basis is. I would like to keep the focus on the Quickbooks question as stated above, but as a matter of fairness, what the State does by collecting on an accrual basis doesn't strike me as fair, and it certainly is NOT pro-business. The State wants to collect tax before the business collects the tax. As a matter of cash flow alone, that can only hurt businesses. You sell a $100K computer and incur a $8.5K sales tax on that sale. State collects its $8.5K right up front. Now the business to whom you sold this stalls payment for 60 days and then short-changes part of the payment. The State wants you to prepay what you haven't even been paid, then it wants you to go through hoops later to explain why you get some of that money back on a later sales tax return. If you are on a quarterly cycle, you can easily end up stretching out your partial recovery of the overpayment to six months. Common sense tells you that a certain number of businesses will fail simply because of the burdens that unbalanced cash flow places on them. The State loses revenue from those businesses failing as well, but my general impression is that most State governments are filled with extremely stupid people who are not even conscious about what a business is or what it requires to thrive, and seem to act like businesses are money trees that exist only to help them cover up their inability to balance their own government budgets. :) The example you use is with a car loan is bad, because in a loan situation the seller is paid in full by the lender up front. In fact most long term leases or loans *accelerate* cash flow to the seller, not stretch it out. It is a lender - NOT the seller - who must deal with cash flow issues for that example. The lender is not responsible for paying the tax, and the lender makes a percent on the loan itself, which already includes the sales tax (i.e., they are in the business of making money when people do delay paying a capital purchase amount). As one example of this government-bred stupidity: Consider that a small business with about $100K in cash assets cannot make a $3M sale with a long payables cycle at the end of the sales tax reporting period without wiping out all of its available cash and throwing the company into disarray. Is the State better served by bankrupting the company and accelerating one miserable payment by 30 days, or is the State better off by creating the conditions in which the company can continue to make $3M sales repeatedly, each of those generating more revenue for the State? The fact that a State government would prefer to throw businesses into cash flow disarray rather than creating conditions for their continued success shows just how short-sighted most State governments are, and how they fundamentally don't understand the environment they regulate at all. The behavior is defensible only if your definition of the long term is 30 days. -- Will "HeyBub" <heybubNOSPAM@gmail.com> wrote in message news:11mdlk7mnsvf4c0@news.supernews.com... Huh? The entire sales tax is due when you sell the item. If you, for example, finance a car for 48 months, the state nevertheless wants ALL of the sales tax NOW, not over four years! In an accrual system, when you sell something, you've sold it irrespective of when you get paid and it is this sale for which the state wants its cut. To restate, you owe the tax even if you never get paid! (There may be ways to get your money back from the state in cases of a deadbeat.) And you cannot pro-rate the tax collected/remitted over time. Is it the case that you're on a cash basis but allow your customers to pay over time? (!) That's going to be really confusing. What you COULD do, I guess, is sell PART of the item each month (doors, hood, engine, etc.), taxing as you go. Nah, that won't fly.

[HeyBub]

Will wrote: You are just restating the premise, not answering the question. The Quickbooks question of interest is how can you force the Sale Tax Payment function in Quickbooks to act on an accrual basis when the business is on a cash basis? On our system, Quickbooks performs the Sales Tax Payment function on a cash basis, and I assume that is because the company books are set to cash. This is a case where Quickbooks should give you a choice, because sales tax reporting rules have no relationship to what your own reporting basis is. I would like to keep the focus on the Quickbooks question as stated above, but as a matter of fairness, what the State does by collecting on an accrual basis doesn't strike me as fair, and it certainly is NOT pro-business. The State wants to collect tax before the business collects the tax.

It is the state's responsibility to collect the tax from the seller. It is
the seller's responsibility to collect the tax from the buyer. The state's
job is not, and should not be, contingent on how well the seller does his
job.
As a matter of cash flow alone, that can only hurt businesses. You sell a $100K computer and incur a $8.5K sales tax on that sale. State collects its $8.5K right up front. Now the business to whom you sold this stalls payment for 60 days and then short-changes part of the payment. The State wants you to prepay what you haven't even been paid, then it wants you to go through hoops later to explain why you get some of that money back on a later sales tax return. If you are on a quarterly cycle, you can easily end up stretching out your partial recovery of the overpayment to six months. Common sense tells you that a certain number of businesses will fail simply because of the burdens that unbalanced cash flow places on them. The State loses revenue from those businesses failing as well, but my general impression is that most State governments are filled with extremely stupid people who are not even conscious about what a business is or what it requires to thrive, and seem to act like businesses are money trees that exist only to help them cover up their inability to balance their own government budgets. :)

From an accounting perspective, the state is correct. In an installment
purchase, you have traded one asset (inventory) for another (promise to
pay). You have further changed the ownership of the item: you traded title
to the merchandise in return for a promissary note (of some kind). Whether
you get the money now or never is a result of YOUR decisions, not the
state's. The state should not have to shoulder the risk of your business
decisions.
The example you use is with a car loan is bad, because in a loan situation the seller is paid in full by the lender up front. In fact most long term leases or loans *accelerate* cash flow to the seller, not stretch it out. It is a lender - NOT the seller - who must deal with cash flow issues for that example. The lender is not responsible for paying the tax, and the lender makes a percent on the loan itself, which already includes the sales tax (i.e., they are in the business of making money when people do delay paying a capital purchase amount).

You are correct in the normal case. There's nothing to stop the seller from
carrying his own notes, though, so the principle still stands. How about
furniture stores that advertise "No payments until 2010!" Do you think the
state should wait four years for their money? Further, a sales tax is a tax
on the business, not the customer and latches in based on business
decisions, not on any action or inaction on the part of the customer.
As one example of this government-bred stupidity: Consider that a small business with about $100K in cash assets cannot make a $3M sale with a long payables cycle at the end of the sales tax reporting period without wiping out all of its available cash and throwing the company into disarray. Is the State better served by bankrupting the company and accelerating one miserable payment by 30 days, or is the State better off by creating the conditions in which the company can continue to make $3M sales repeatedly, each of those generating more revenue for the State?

The latter. If it were the sole goal of government to make things easy for
businesses, there would be no taxes, regulations, or laws.
The fact that a State government would prefer to throw businesses into cash flow disarray rather than creating conditions for their continued success shows just how short-sighted most State governments are, and how they fundamentally don't understand the environment they regulate at all. The behavior is defensible only if your definition of the long term is 30 days.

[CHANGE username to westes]

You may be happy to know that as a concession to your previous points, now
every time I post a new thread here I make a point to first answer someone
else's question. I shall pay my forum taxes. :)

--
Will


"Allan Martin" <Allan@GreatGuy.com> wrote in message
news:H7L9f.37820$rE2.27708@fe10.lga... "Will" <DELETE_westes@earthbroadcast.com> wrote in message news:zJWdnYTYyLWKbvveRVn-hA@giganews.com... You are just restating the premise, not answering the question. The Quickbooks question of interest is how can you force the Sale Tax
Payment function in Quickbooks to act on an accrual basis when the business is
on a cash basis? On our system, Quickbooks performs the Sales Tax Payment function on a cash basis, and I assume that is because the company books are set to cash. Ok, I will deviate from my normal respose to your multitude of questions just today. There is an option in the sales tax section of preferences
that allows you to change from cash to accrual for determining sales tax liabilitiies.

[CHANGE username to westes]

"HeyBub" <heybubNOSPAM@gmail.com> wrote in message
news:11mf2ivdhoevn73@news.supernews.com... It is the state's responsibility to collect the tax from the seller. It is the seller's responsibility to collect the tax from the buyer. The state's job is not, and should not be, contingent on how well the seller does his job.

Spoken like a lawyer who wants to enforce the letter of the law, and who
doesn't care or understand that the enforcement method actually shrinks the
tax base.

Not spoken like an economist or a business-savvy bureaucrat who wants to
maximize revenue by maximizing prosperity of the tax base.

As a pratical matter, if there is no payment, then there is no consumated
sale. Even the state recognizes that and gives you a way to back out the
taxes paid when you are not able to collect on the sale. So the state's
job is in fact contingent on how well the seller does its job, and on how
honest ore creditworthy the buyer is, and the only difference here is one of
timing.

You are correct in the normal case. There's nothing to stop the seller
from carrying his own notes, though, so the principle still stands. How about furniture stores that advertise "No payments until 2010!" Do you think the state should wait four years for their money? Further, a sales tax is a
tax on the business, not the customer and latches in based on business decisions, not on any action or inaction on the part of the customer.

Actually this is not true. The sales tax is a tax on the end user, and
simply for reasons of practical enforcement, the government collects from
the seller. But technically every business should be paying the state use
tax on any purchases made on which tax was not collected by a seller, in
state or out of state.

The latter. If it were the sole goal of government to make things easy for businesses, there would be no taxes, regulations, or laws.

The goal of government taxation is to maximize tax revenue. The best
method for maximizing tax revenues is to create conditions for economic
prosperity of the tax base. Only by growing the fruit tree do you get to
steal lots of fruit. The view that taxation and the methods used for
taxation are something that are independent of prosperity of the tax base
strikes me as medieval thinking. What is so striking to me in the case of
sales tax revenue, is that no one is disagreeing here that there should be a
tax or that it should be paid. It's simply a question of timing it in a
way that doesn't starve businesses of cash. The fact that no one in the
sales tax system gives thought to such things is fairly amazing.

--
Will

[Allan Martin]

"Will" <DELETE_westes@earthbroadcast.com> wrote in message
news:2_-dnT4Fatr3K_reRVn-uQ@giganews.com... You may be happy to know that as a concession to your previous points, now every time I post a new thread here I make a point to first answer someone else's question. I shall pay my forum taxes. :)

It has been said, no actually I was the one who said it, "Big Al Martin is
the dues you must pay to feed in the public troth

-- Will "Allan Martin" <Allan@GreatGuy.com> wrote in message news:H7L9f.37820$rE2.27708@fe10.lga... "Will" <DELETE_westes@earthbroadcast.com> wrote in message news:zJWdnYTYyLWKbvveRVn-hA@giganews.com... You are just restating the premise, not answering the question. The Quickbooks question of interest is how can you force the Sale Tax Payment function in Quickbooks to act on an accrual basis when the business is on a cash basis? On our system, Quickbooks performs the Sales Tax Payment function on a cash basis, and I assume that is because the company books are set to cash. Ok, I will deviate from my normal respose to your multitude of questions just today. There is an option in the sales tax section of preferences that allows you to change from cash to accrual for determining sales tax liabilitiies.

[Steve Nicholson]

"Will" <DELETE_westes@earthbroadcast.com> wrote:
...most State governments are filled with extremelystupid people who are not even conscious about what a business is or what itrequires to thrive, and seem to act like businesses are money trees thatexist only to help them cover up their inability to balance their owngovernment budgets. :)

This is exactly the attitude of Intuit in terms of the Quickbooks
software development.

===

[CHANGE username to westes]

I would disagree on that point. I pay more money for a single tax return
than I am paying Intuit for the entire software infrastructure they provide
to run the books. I pay twice what the tax return costs just for
administrative staff to proofread all of the mistakes in the accountant's
tax returns.

I don't even have a problem with Intuit wanting to charge for support.
What I have a problem with is Intuit populating the support phones with
people who don't speak English well and who don't understand the products
they are supporting. We stopped paying Intuit for support because the
quality of the support product was awful.

--
Will


<nospam@invalid.com> wrote in message
news:tssfm1ljbi6v6bp3nsa08mr55vbk1ei4s0@4ax.com... "Will" <DELETE_westes@earthbroadcast.com> wrote:...most State governments are filled with extremelystupid people who are not even conscious about what a business is or what
itrequires to thrive, and seem to act like businesses are money trees thatexist only to help them cover up their inability to balance their owngovernment budgets. :) This is exactly the attitude of Intuit in terms of the Quickbooks software development. ===

[John]

On Tue, 1 Nov 2005 09:31:39 -0600, "HeyBub" <heybubNOSPAM@gmail.com>
wrote:
Further, a sales tax is a taxon the business, not the customer and latches in based on businessdecisions, not on any action or inaction on the part of the customer.

That's only partly true. You become an "agent" of the state and
collect the tax for them when you get your sellers permit. It's not a
tax on your buisness. That would be double taxation and we know the
state never does that...
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[John]

On Tue, 1 Nov 2005 10:57:38 -0800, "Will"
<DELETE_westes@earthbroadcast.com> wrote:
"HeyBub" <heybubNOSPAM@gmail.com> wrote in messagenews:11mf2ivdhoevn73@news.supernews.com... It is the state's responsibility to collect the tax from the seller. It is the seller's responsibility to collect the tax from the buyer. The state's job is not, and should not be, contingent on how well the seller does his job.Spoken like a lawyer who wants to enforce the letter of the law, and whodoesn't care or understand that the enforcement method actually shrinks thetax base.

A Democrate?Not spoken like an economist or a business-savvy bureaucrat who wants tomaximize revenue by maximizing prosperity of the tax base.

A Republican?

I can joke kuz I'm neither
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[John]

On Wed, 2 Nov 2005 16:33:25 -0800, "Will"
<DELETE_westes@earthbroadcast.com> wrote:
I would disagree on that point. I pay more money for a single tax returnthan I am paying Intuit for the entire software infrastructure they provideto run the books. I pay twice what the tax return costs just foradministrative staff to proofread all of the mistakes in the accountant'stax returns.I don't even have a problem with Intuit wanting to charge for support.What I have a problem with is Intuit populating the support phones withpeople who don't speak English well and who don't understand the productsthey are supporting. We stopped paying Intuit for support because thequality of the support product was awful.--Will

Amen!
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| o'