How To DIY: Managing Day To Day Liabilities: Sales Tax
Nov 03, 2023
The second liability that we are going to mention this week is Sales Tax. Each state payment options and due dates vary by state. In most states, you need to get prior approval and a license number to collect a sales tax.
Payment is normally due a few weeks after the end of the previous month…usually on the 15th or 20th depending on your state. There are some filers in certain states that are assigned to the quarterly filing frequency as well as annual filing. Of course, please always consult the state’s tax agency to confirm.
Sales tax money is never yours to use for the operations of the restaurant. Too many times, we have seen owners use the sales tax money for payroll expenses, resulting in cash flow problems that can equate to the closure of the restaurant. We recommend setting up a savings account specifically for sales tax received to avoid this issue and transfer the amount received weekly into this account to make your payments.
Because this is money that is received but is not yours…it is essentially money in trust for the government so make sure it is not listed as income. It is money that is listed on the balance sheet, accruing no interest income or expenses until it is remitted to the government. That stinks, right?
Although part of your cash deposit or credit card deposit is part of the tax, you have to make sure it is coded correctly by setting up your sales journal entry to account for that amount. You know exactly how much you are receiving in both cash and credit cards, how much of that is sales tax due to the government, and how much are tips payable.
So knowing your restaurant liabilities, for instance, the amount of sales tax money you are holding for the government and when those funds are due will result in your ability to manage those liabilities. By properly managing your daily liabilities, your restaurant will prosper and grow.
Do you have any questions or need help to manage your day to day liabilities?
Ready to transform your restaurant's finances? Whether you need Monthly Bookkeeping, a Catch-up Bookkeeping service, or want to embark on our DIY Bookkeeping Course, we've got you covered. Have questions or need more information? Don't hesitate to reach out. Let's talk about how we can support your business. Schedule your FREE 15-Minute Call today and let's get started on your path to stress-free bookkeeping!
