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(This question could probably use a better title)

My current process for paying sales tax works as follows:

  1. I collect payments against invoices from clients throughout the month
    • As I collect these payments, Accounts Receivable decreases and Sales Checking* increases, naturally
  2. At the end of the quarter, I then transfer the sales tax portion of the payments I collected throughout the month from Sales Checking* to Sales Tax Checking*

I noticed that this obviously doesn't impact my Sales Tax Payable account, which remains unaffected. How do I then account for the amounts that I am transferring from Sales Checking* to Sales Tax Checking* in Sales Tax Payable so I see an accurate representation of sales tax that I truely still owe?

Sales Checking = Cash account that is connected to a checking account at my bank.
Sales Tax Checking = Another account that is connected to a checking account at my bank. This account only takes transfers from Sales Checking and my state then deducts the sales tax from there quarterly.

share|improve this question
How did you record the revenue transaction in the first place .. did you use QuickBooks to create an invoice? Somewhere when you record the revenue it should be calculating the tax. – Chris W. Rea Nov 17 '11 at 12:48
@Chris - I created an invoice in Quickbooks which increased Accounts Receivable and Sales Tax Payable correctly. – Brian David Berman Nov 17 '11 at 14:31
up vote 1 down vote accepted

Write Check

Bank Account: Sales Tax Checking

Pay to the order of: Massachusetts Department of Revenue (in my case)

Account: Sales Tax Payable


This will decrease Sales Tax Payable AND Sales Tax Checking.

share|improve this answer
Thanks for posting your finding. +1 – Chris W. Rea Nov 17 '11 at 14:53

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