Invoiced and accrued taxes

Invoiced taxes

Invoiced taxes are included in the amount of the invoice. For example, an invoice for $106.50 may represent $100 of purchased goods and $6.50 of taxes on those goods. Examples of taxes that generally show up as an additional charge on an invoice include:

• State Sales Tax

• Provincial Sales Tax (PST)

• Value Added Tax (VAT)

• Goods/Services Tax (GST)

When specifying an invoice with an invoiced tax, the invoice amount includes the tax amount. In the previous example, you would specify $106.50 as the invoice amount. The invoice amount and the total of your distribution lines must equal $106.50.

Accrued taxes

Accrued taxes are taxes that you are responsible for paying, but which have not been included in the invoice. A common example of an accrued tax is a use tax, which is a tax imposed on the consumer for use or consumption of goods that a company in the United States produces and consumes itself.

For example, a company that manufactures autos might add one of those autos to its company fleet. They are invoiced for $20,000, which represents the purchase price of the car. They are also liable for paying $2,000 in taxes for the car, but that amount was not included in the invoice. They are responsible for accruing those taxes and submitting them to the government.

When specifying an invoice with an accrued tax, the invoice amount and the total of your distribution lines will not equal the same amount because the accrued amount represents an additional charge not included in the invoice.