On certain goods and services I have to calculate a sort of ‘luxury tax’. For example if the company were to buy NY presents for its employees, a 10% tax on the whole amount of the purchase will be payable to the tax authority.
However, this amount is not stated on the invoice for the purchase. As far as I can see this cannot be added to the invoice as tax, as it will increase the amount owed to the supplier.
Is there any way to create a tax liability account to track this amount automatically?
Okay so if the amount is the purchase value is 100 only 90 will be paid to the customer and 10 will be withheld and paid to the tax authorities.
This sounds like Withholding tax. Please search the forum. I’m busy now, I will find time and show you how easily you can use manager to track this kind of tax
No.
the value of the purchase is 100. 100 will be paid to the supplier.
Then, at end of tax period, an additional 10 will be paid to the tax authority.
Hmmm
The way of I would think it should be possible to do it is to have a liability account that calculates the 10% tax on the ‘luxury good’ expense account.
So I post all the purchases on that expense account, and for every purchase the owed tax is increased on the liability account.
No capability exists to so what you want contemporaneously. But if you post the purchase expense to a separate expense account, you can calculate the luxury tax due at filing time. Then just spend money to pay the tax. Post the expenditure to a taxes paid account.
The reason you don’t need more elaborate accounting, like you do with VAT for example, is that no liability exists until tax filing time. And the tax will not be offsetting any tax collected.
Yes I know how t do it; I was asking if it could be done somehow automatically. Thanks.
Both of these quotes from your post (#5) have only focused on creating the credit leg (liability) and have ignored the required need to also create a debit leg (expense)
No, because you have two totally separate obligations to third parties - the supplier (100) and the tax office (10) - which are generated independently of each other.
There is nothing to do automatically, because there has been no financial transaction concerning the luxury tax.
I think closing the liability at end of tax period will account for the debit leg.
A - To create the liability you need both legs - a debit (expense) and credit (tax payable)
The noted quotes have ignored the creation of this debit
B - To close the liability you also need both legs - a debit (tax payable) and credit (bank)
So the question is, when does the obligation for the Luxury Tax arise ?
A solution for (1) could be to add the tax “Journal” to the supplier’s purchase invoice process
