What to do with taxes already paid to the state?

I hope this was a misstatement. You should say that you cannot just post a payment without having a place for it to go.

The closest equivalence in your country is sales tax. The biggest difference is that value added tax schemes offset VAT you pay to your suppliers against VAT you collect from your customers. Sales and use taxes are non-offsetting.

If your state allows you to keep a portion of the sales tax collected, you need to do two things:

  • Remit the reduced amount to your tax authority. This is recorded as a payment posted against the tax liability account.
  • Make a journal entry to transfer the credit remaining in the tax liability account to a suitable income account (probably one you set up for the purpose). The journal entry would debit the tax liability account and credit the income account. Presumably, your periodic sales tax return includes the calculation of the correct amounts. This journal entry will result in you having no liability showing as money owed to the tax authority. (That assumes you haven’t had any other transactions between the end of the filing period and remittance of the collected sales tax due.)
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