Weekly Dynamic: Use Tax in Payables

Richard Whaley loves this tip so he get credit for it. It's not unusual for companies to have to self asses Use Taxes on items they buy. Often it's an out of state or different country vendor who doesn't charge tax. To process an AP invoice and accrue the tax is pretty simple.

1) Setup the tax as you would a sales tax in GP with all the relevant rules and jurisdictions. For example, here in Orlando, we have a state use/sales tax and a local option on top of that.

2) Setup a credit card for Use Tax for that jurisdiction

3) Process the payable, applying the Use Tax in the tax line just as you would do with sales tax.

4) Pay the Use Tax amount with the Use Tax credit card you setup in #2.

This leaves the correct payable in AP and sets up a payable to the taxing authority to be paid at month end along with providing a trail in the GL of how you got there.

Sadly, it's not this easy with Purchase Order Processing, especially when you need to apply the accrued tax to the line items. But for AP, this technique works great!

Update: Richard has emailed to say that this tip originally came from Leslie Vail so she deserved the credit. Thanks for the great tip Leslie!