To illustrate, let's assume that all of a retailer's products are subject to a state sales tax of 6%. If the retailer sells $500 of merchandise for cash, it will collect $530. This will be recorded with 1) a debit to Cash for $530, 2) a credit to Sales for $500, and 3) a credit to Sales Taxes Payable for $30. Note that the Sales account did not include the $30 of sales taxes.
When the retailer remits the sales taxes to the government, the liability account Sales Taxes Payable will be debited.
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