Sales Tax When Categorizing

khud408

I live in the state of Florida and use Quicken Home and Business religiously. I've been debating for a while now if I should also be tracking sales tax when I categorize my transactions. Which would mean almost every transaction would have a split. But if I do not track sales tax if I go to do a split, it tends to get rather confusing as to what portion of the sales tax goes to which category/split. Does that make sense? So it almost seems like tracking sales tax would be more accurate? Thoughts? Curious how other folks handle this.

UserDavidC

I just have one category for sales tax.

So if I go to Target and buy 10 items (all of which are taxed) where I split the charge into household goods, clothes, soda and supplies, I just put all the sales tax under the category 'sales tax'. I don't try to decide the amount of sales tax for the soda, for the supplies, etc.

NotACPA

I agree with @UserDavidC's method ... which I've used for 30 or so years.

There's no state income tax in my state, so I'm able to deduct the Sales tax on my Federal tax return.  What I paid the tax for really doesn't matter to the Feds ... just that I paid it.

SO, Sales Tax has it's own category that has the "Schedule A: State Income Tax" line associated with it.

Rocket J Squirrel

NotACPA said:

Sales Tax has it's own category that has the "Schedule A: State Income Tax" line associated with it.

I also split every sales taxed transaction. This makes it trivial to total at income tax time.

But the correct TLI is "Schedule A:Sales Tax Paid".

NotACPA

Rocket J Squirrel said:

NotACPA said:

Sales Tax has it's own category that has the "Schedule A: State Income Tax" line associated with it.

I also split every sales taxed transaction. This makes it trivial to total at income tax time.

But the correct TLI is "Schedule A:Sales Tax Paid".

Maybe that's true in a state that has BOTH sales tax and income tax ... but in my state the sales tax is considered to be income tax.  And it looks to me like they end up in the same place.

James J

People track the sales tax for every. single. transaction?  That’s a lot to record.   But if you have no state tax that you can deduct from your federal income tax, then I can understand why you’d do this. 

I’m curious if you ever tried the IRS sales tax estimator: https://www.irs.gov/credits-deductions/individuals/use-the-sales-tax-deduction-calculator 

How do it’s results compare to the actual sales tax (as you recorded it)?

NotACPA

James J said:

People track the sales tax for every. single. transaction?  That’s a lot to record.   But if you have no state tax that you can deduct from your federal income tax, then I can understand why you’d do this. 

I’m curious if you ever tried the IRS sales tax estimator: https://www.irs.gov/credits-deductions/individuals/use-the-sales-tax-deduction-calculator 

How do it’s results compare to the actual sales tax (as you recorded it)?

My actual Sales Tax paid, as recorded in Q, is MUCH larger (2-3 times larger) than what the IRS estimator states.  So it's well worth the trivial time spent to record it.

Also, for example, my Memorized "Kroger" transaction already has the split lines for Groceries and Sales Tax included ... and the Kroger receipt states sales tax separately. So it's almost no effort to record.

khud408

Wow awesome, ok yes that was super helpful and makes me feel better about taking that route. Thank you so much!
> @NotACPA said:
> I agree with @UserDavidC's method ... which I've used for 30 or so years.There's no state income tax in my state, so I'm able to deduct the Sales tax on my Federal tax return.  What I paid the tax for really doesn't matter to the Feds ... just that I paid it.SO, Sales Tax has it's own category that has the "Schedule A: State Income Tax" line associated with it.

khud408

Yes I am curious as well at the end of the year to compare the two against what I tracked. Thank you for sharing that link. I forgot that they had that.

> @"James J" said:
> People track the sales tax for every. single. transaction?  That’s a lot to record.   But if you have no state tax that you can deduct from your federal income tax, then I can understand why you’d do this. 
> I’m curious if you ever tried the IRS sales tax estimator: https://www.irs.gov/credits-deductions/individuals/use-the-sales-tax-deduction-calculator 
>
> How do it’s results compare to the actual sales tax (as you recorded it)?