Sales taxes collected from customers should be recorded in a liability account until the cash is passed along to the taxing authority.

Question

Quizplus · Accepted Answer

Sales taxes collected from customers are not considered as revenue earned by the company but as a liability until they are remitted to the taxing authority. Therefore, sales taxes collected should be recorded in a liability account until the cash is passed along to the taxing authority.

Sales Taxes Collected from Customers Should Be Recorded in a Liability