How to deduct cash discount amounts and write-off amounts from your state sales tax liability in Small Business Accounting (897532)

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1. Calculate the total cash discount amounts and the write-off amounts for taxable sales. To do this, follow these steps:
   1. On the Reports menu, point to Customers and Receivables, and then click Customer Transaction History.
   2. On the toolbar, set the dates in the Date Range box to coincide with the tax payment period, and then click the Refresh Report button.
   3. On the toolbar, click Export to Excel.
   4. In Microsoft Excel, total the Discount column, and then total the Write-Off column.
      
      Note For more information about how to total columns in Excel, see the "Add numbers" topic in Microsoft Excel Help.
   5. Add the two totals from step 1d, and then write down that number.
      
      Note You will use this number to reduce the total gross sales and the related sales tax liability after you remove any cash discount amounts and write-off amounts that are related to non-taxable sales invoices in the next step.
   6. Subtract the cash discount amounts and the write-off amounts that are associated with non-taxable invoices from the total in step 1e. To do this, follow these steps:
      1. In the Customer Transaction History report in Small Business Accounting, double-click a payment line that contains a cash discount amount or a write-off amount.
      2. Record all the invoice numbers that are referenced in the Invoice column and that contain values in the Cash Discount box or in the Write Off box. For each invoice, track the payment number, the invoice number, the write off amount, and the cash discount amount.
      3. Click Save and Close.
      4. Repeat steps 2 through 3.
      5. In the Customer Transaction History report in Small Business Accounting, locate an invoice number from step f2, and then double-click the line that contains the invoice.
      6. If the amount in the Sales Tax box is $0.00, the invoice is a non-taxable invoice that should remain on the list that was recorded in step f2.
         
         If the Sales Tax box contains an amount, cross off the invoice that was recorded in step f2.
      7. Repeat steps f5 through f6 for all the invoices that were recorded in step f2. This process identifies the cash discount amounts and the write-off amounts that are related to non-taxable sales.
      8. Total the cash discount amounts and then total the Write Off Amounts.
      9. Add the two totals from step f8, and then write down that number.
      10. Subtract the amount in step f9 from the total in step 1e. You will use the result to reduce your sales tax liability.
2. Generate the "Profit and Loss" report. To do this, point to Company and Financial on the Reports menu, and then click Profit and Loss.
3. On the toolbar, set the dates in the Date Range box to coincide with the tax payment period. Then, click the Refresh Report button.
4. Locate the sales account that is used to track income, and then note the account balance.
   
   Note If you use more than one account to track income, total all the account balances.
5. Generate the Sales Tax Liability report. To do this, point to Sales Tax on the Company menu, and then click View Sales Tax Liability.
6. On the toolbar, set the dates in the Date Range box to coincide with the tax payment period. Then, click the Refresh Report button.
7. Note the total in the Taxable column for the state tax agency.
8. Subtract the taxable sales that you noted in step 7 from the total sales in the "Profit and Loss" report from step 4. The result is the non-taxable gross sales amount (B) that you use in the net taxable sales formula.
9. Calculate the net taxable sales amount by using the formula. To do this, take the total sales from the "Profit and Loss" report in step 4, and then subtract the non-taxable gross sales from step 8. Next, subtract the total cash discount amount and the write-off amount that are related only to taxable sales. (You calculated this amount in step f11.)
10. Multiply the net taxable sales amount in step 9 by the state sales tax rate to obtain the new state sales tax liability amount.
    
    To find the correct tax rate, follow these steps:
    1. On the Company menu, point to Sales Tax, and then click Manage Sales Tax Codes.
    2. In the Tax Code pane, click to select the state tax code, and then click Edit. The tax rate appears in the Rate column.
       
       Note If a rate change occurred during the tax payment period, you may have more than one rate listed. If a rate change occurred, contact your accounting professional for help.
11. Subtract the new state sales tax liability amount from the original sales tax liability.
    
    Note To locate the original state sales tax liability, point to Sales Tax on the Company menu, and then click Pay Sales Tax. The original sales tax liability appears in the Tax due column.
12. Enter the difference that you calculated in step 11 as an adjustment in the Adjust Sales Tax window. To do this, follow these steps:
    1. On the Company menu, point to Sales Tax, and then click Adjust Sales Tax Due.
    2. In the Date effective box, enter a date that is included in the tax payment period.
    3. In the Journal entry number box, accept the default journal entry number, or enter a different journal entry number.
    4. Select a general ledger income account in the Tax income or expense box. Typically, the account that you should select is the cash discount account or the write-off account.
    5. In the Tax Code to adjust box, select the tax code that you are reducing.
    6. Click to select the Decrease check box, and then type the amount of the adjustment in the Amount box.
    7. Click OK to close the Adjust Sales Tax window.