Tracking Sales Tax on Purchases (Use Tax)

Accounting & Taxes

How to Track Use Tax (tax paid at the point of purchase)

Many states require you to pay sales tax on purchases you make, even if you are planning to resell the products and collect sales tax from your customer. If you are required to pay use tax for out-of-state purchases that you will resell, you might also be able to deduct those amounts when you file your Sales Tax returns.

In Total Office Manager, you may track sales tax amounts paid to a vendor in a designated chart of account you have created for taxes paid on purchases then deduct the amount from your tax liability due when paying your sales tax to the tax authority.

Purchase Transaction Creation

Create the purchase transaction. Purchase transactions may be entered in one of the following ways:

1. Bills
   a. Workflow Navigator | Vendors | Enter Bills.
   b. From the main menu Vendors | Enter Bills.
   c. CTRL + B
   d. Workflow Navigator | Vendors | Receive Items & Enter Bills.
   e. From the main menu Vendors | Receive Items & Enter Bills.
2. Credit Card Charges
   a. Workflow Navigator | Banking | Credit Card Charge.
   b. From the main menu Banking | Manage Credit Cards | Credit Card Charge.
   c. From the Credit Card Credit/Charge List, right click and choose New Credit Card Charge.
3. Checks
   a. Workflow Navigator | Banking | Write Checks.
   b. From the main menu Banking | Write Checks.
   c. CTRL + W
   d. From the toolbar, click Check or the image of a check.
   e. From the Check List, right click and choose New Check.

After entering the items you have purchased on the Items Tab, select the Chart of Account you have created for tracking the taxes you have paid on purchases in the account column on the Expenses Tab.

Paying Your Tax Liability

When it is time to pay your Sales Tax liability, run the Transactions Detail by Account (Reports | Accounting) for the Chart of Account used to track taxes paid on purchases for the period you are paying.

Enter a Sales Tax Adjustment (Customers | Sales Tax | Sales Tax Liability Adjustment) for the amount reported in the Chart of Account.

When paying your Sales Tax liability (Customers | Sales Tax | Pay Sales Tax), select the negative amount in the {Unknown Tax} along with the Sales Tax Items you are paying. This will reduce the tax liability reported on the sales tax payment.

Edit the Sales Tax Liability payment (Banking | Check List) to complete the check entry.

Sales Tax Websites by State

As each tax district (town, city, county, or state that charges sales tax) may have their own rules and regulations for collecting and paying sales tax, it is advised you speak with a qualified Tax Attorney with questions related to Sales Tax. For more information on specific state rules regarding Sales Tax regulations, please check your state and/or local tax authority websites.

Sales Tax Related Help Topics

Troubleshooting Sales Tax Problems and How to Fix Them

Additional information

State tax agency directory

Each state's revenue department publishes its own sales and use tax rules. The Federation of Tax Administrators keeps a current directory of state tax agency websites: State tax agencies.