Sales Tax Report - How is "Sales Subject to Tax" Calculated?

barrytbarryt Member Posts: 30

Hi, I have noticed a discrepancy between the Sales subject to Tax value shown in the Sales Tax report. I have the dates set the same for my reporting, July1 to Jun30th. My Income Statement and Income by Customer are correct. The Sales subject to tax doesn't match. I've tried to search down the discrepancy, but cannot find it. So, can you clarify how the "Sales Subject to Tax" int he Tax report is actually calculated?
Thanks!

Comments

  • JordanDJordanD Administrator, Moderator Posts: 344 admin

    Hey @barryt and thanks for reaching out in the Wave Community! The sales subject to tax section on the Sales Tax Report replies upon a sales tax being applied to the transaction in Wave or added to the item in an invoice. It sounds as though you may not have applied the sales tax to a transaction on your transactions screen for the selected date range. Since you are looking at a 12 month period, I'd recommend filtering your date range down to smaller increments in order to find the transaction that you may have missed and then applying the sales tax. This should then show correctly on your reporting on your Sales Tax Report.

  • barrytbarryt Member Posts: 30

    Thanks for that @JordanD
    Actually, I have found the delta...I raised an invoice with reimbursable expenses, but my error, I accidentally used the GST inclusive figure from the original receipts on the invoice, meaning I invoiced too much (10%). The customer paid the invoice before the error was detected. I agreed with the customer to use the error amount against future expenses.
    So, the issue was trying to correct this....I thought I could follow you credit note examples shown elsewhere. That cleared up reimbursable expenses, but the error amount still shows up in "sales subject to tax". I had expected to be able to reduce the sales subject to tax amount as it was an error, but perhaps it's my misunderstanding (bookkeeping amateur) that once paid, whether it's an error or not, the amount will always be included as 'subject to tax'. Perhaps you could advise if this is correct?
    Thanks
    Barry

    edited September 15, 2019
  • ChelseaKChelseaK Administrator Posts: 264 admin

    Hey @barryt! If I'm understanding your situation correctly, it sounds like what's possible is that you applied a 'non-recoverable' sales tax to your transactions, which is why you're seeing the wrong amounts on your Sales Tax Report. When you created your sales tax, did you set it to non-recoverable? If that's the case, you can create a new recoverable sales tax and apply it to those transactions. This way, those tax values will populate on your Sales Tax Report. This Help Centre article walks you through the steps of creating recoverable versus non-recoverable sales taxes: https://support.waveapps.com/hc/en-us/articles/115004972006-Adding-sales-taxes-
    This article goes into detail about what the differences between recoverable and non-recoverable taxes mean and how these categories affect your Reports: https://support.waveapps.com/hc/en-us/articles/208623426-Taxes-Recoverable-vs-Non-Recoverable

    Does that help clarify what could be going on in your account?

  • barrytbarryt Member Posts: 30

    Hi @ChelseaK , thanks for your response.
    I only have one sales TAX (GST) and it has been set to recoverable from day 1.
    In any case, I now know the 'discrepancy' is due to my explanation above. i.e I mistakenly invoiced too much for reimbursable expenses and the customer paid the invoice, both of us missing the error until recently. We agreed that I would hold the extra amount against future expenses.
    I originally thought I could journal out the error through a credit note type workflow, and I thought (incorrectly I now believe) that I could also reduce my sales subject to tax (until I had a future expense). I am now realising however that I still have the obligation to pay GST to the govt on that amount because I have collected it from the customer.
    So it seems like the system is doing fine and I was wrong in my initial thinking about being able to 'delay' the Sales Tax amount invoice error until I actually used it for a future reimbursable expense.
    Make sense ?
    Thanks
    Barry

  • barrytbarryt Member Posts: 30

    Out of interest, have you changed anything recently with the sales tax report? I reran the report for last fin year again (one week later) and the "tax amount on purchases changed". Wierd.

  • AlexLAlexL Administrator Posts: 1,514 admin

    Hey @barryt . Picking up where Chelsea left off here... Based on your explanation, this makes sense. I feel like to be 100% sure I'd have to see it in action, but based off your words alone you seem to be correct.

    Also, we haven't changed anything in the Sales Tax Report.

  • barrytbarryt Member Posts: 30

    Hi @AlexL ,
    I had a break from trying to sort out things, and have just revisited this.
    Another issue/question...
    I am thinking that the Sales Tax method of Accrual or Cash reporting isn't quite suitable for Australia. I am reporting GST on a cash base method, ie only pay the govt when the GST is actually received/paid. Trying to map to your methods, I seem to have an issue with entries related to items purchased using my personal account and then journalled across through Owner Investment/Drawings, where I claim back my business use of GST of those expenses. But, if I use sales tax reporting on a cash basis, then these GST payments are not included. If I use accrual, it also includes GST not yet received.
    How do I get a cash based tax report that includes journalled entries and GST actually received/paid?

    Also, although my final tax figure is correct (ignoring the issue above), I still can't reconcile the sales subject to tax field. I've checked all income, journalled items but the number just doesn't match the actual income numbers. So, back to my very original question - could you explain how the sales subject to tax is calculated? (I've spend ages going through an exported transaction list and modelling things in excel, but no luck).
    Thanks

  • barrytbarryt Member Posts: 30

    Hi @AlexL ,
    Some good news. After quite a lot of google searching I found a suggestion from another user that has straightened things out.
    I note a few other Australian users with the similar issues re the cash based reporting for Tax and perhaps this may be of use.
    I set up a new Cash Account called Owners cash
    Wherever I had a journal that used to use Owners Investment + GST for purchases on personal account, I changed Owners Investment to Owners Cash.
    I then did one journal back of the Owners Cash Balance to Owners Investment.
    All the Sales Tax numbers now show up correct on a cash basis. :)
    Cheers
    Barry

  • AlexLAlexL Administrator Posts: 1,514 admin

    Hey @barryt . I need to give you kudos for answering your own question here. Definitely not an easy subject and each time you're able to do the necessary research to figure it out on your own. You deserve two thumbs up here!

  • barrytbarryt Member Posts: 30

    Hi @AlexL , no problem. Perhaps you should consider a small amendment to this advisory post of yours to run things through a 'dummy' cash account if needs be?
    https://support.waveapps.com/hc/en-us/articles/208622836-Handling-Business-Expenses-With-a-Personal-Bank-Account

  • AlexLAlexL Administrator Posts: 1,514 admin

    Thanks @barryt . I'll shoot your feedback to the team :smile:

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