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Accounts Payable

Accounts Payable. Section 5 – Use Tax. In most states, vendors are responsible for paying use tax when they buy taxable goods and services for use and the seller does not charge sales tax, or does not charge the correct amount of sales tax. However, different states have different

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Accounts Payable

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  1. Accounts Payable Section 5 – Use Tax

  2. In most states, vendors are responsible for paying use tax when they buy taxable goods and services for use and the seller does not charge sales tax, or does not charge the correct amount of sales tax. However, different states have different requirements about what types of goods and services are subjected to use tax, and at what rates.

  3. Most use tax requirements and specifications can be found online. You may also contact Brenda Teter at corporate office for assistance. It is important that you get familiar with your state’s requirements. This training section, however, only covers the most basic concepts and its calculation.

  4. To qualify if any invoice shall be subjected to • use tax calculation, one shall meet the • following 3 requirements: • You purchase a tangible product(s)* • Your intention is to use those product(s), • rather than reselling them, and • No tax, or incorrect tax rate is charged • on such invoice. • * Again, some states require certain types of service • to be subjected to use tax as well.

  5. In this example, we purchase breakfast items with an intention to give away; there is a 6% sales tax (correct rate) on the invoice.In this case no use tax calculation is needed. GL# 040-167-000

  6. What if the invoice looks like this. Note that there is no sales tax posted.As we intend to give away these products,this invoice is now subjected to use tax.

  7. To calculate use tax, we simply increase the General Ledger expense by the correct tax rate, and post the difference to the “Accrued Use Tax” GL code. Using the above example, the invoice amount remains as $100.00. We increase the expense by 6% (from $100 to $106), and post the difference ( <$6> ) to 860-007.

  8. Those GL codes now look like this.Notice the invoice total remains as $100. GL# 040-167-000: $106 860-007: <$6>

  9. Whether you realize or not, you deal with vendors’ invoices with no sales tax more often than you think. To name a few, . Courtesy Products (in room coffee) . Coast To Coast (ink cartridge) . USA Today (newspaper) . A S Hospitality Use tax is a serious matter. Violating use tax requirements can cost the property thousands and thousands of dollars, along with hours and hours of research and headache.

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