> For the complete documentation index, see [llms.txt](https://now-8.gitbook.io/now.-features/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://now-8.gitbook.io/now.-features/accounting/sales-tax.md).

# Sales Tax

now. lets you record sales tax on invoices and bills, and tracks the running balances in your Chart of Accounts. This page explains how it works and what now. does (and does not) do.

#### Important Disclaimer

**now. does not file, remit, or pay sales tax on your behalf.** It does not determine whether a transaction is taxable, calculate tax based on jurisdictional rules, or verify that the rates you enter are correct. All tax rates and amounts are user-supplied. You are solely responsible for determining your sales-tax obligations, applying correct rates, collecting tax from your customers, and remitting tax to the appropriate authorities by their deadlines.

We strongly recommend consulting a qualified tax professional.

#### Two Sides of Sales Tax

For most businesses, sales tax shows up in two places:

1. **Tax you collect from customers on invoices.** This is money you owe to a tax authority. It's a liability, recorded in **Sales Tax Payable**.
2. **Tax you pay to vendors on bills.** This is an expense your business incurs (sometimes called purchase tax or use tax). It's recorded in **Sales Tax Paid**.

Both accounts are seeded in your Chart of Accounts automatically and are system-protected (you can't archive or delete them).

#### Sales Tax on Invoices

When you create an invoice, you can enter a **Tax rate** (a percentage). now. calculates the tax on the subtotal and shows it as a separate line on the invoice document.

When you save the invoice:

* **Accounts Receivable** is debited for the gross total (subtotal + tax).
* **Income** is credited for the subtotal only — your revenue is the pre-tax amount.
* **Sales Tax Payable** is credited for the tax amount — that's what you owe the authority.

When the customer pays the invoice and you match the bank transaction, the cash moves from AR to your bank account. The Sales Tax Payable balance does not change at payment — it stays on the books until you remit the tax to the authority. To record that remittance, create a manual journal entry that debits Sales Tax Payable and credits the bank account you paid from. See Journal Entries.

#### Sales Tax on Bills

When you create a bill, you can enter a **Tax rate** for the purchase tax your vendor charged you. now. records the tax separately:

* **Inventory Asset / Expense accounts** are debited for the line subtotals.
* **Sales Tax Paid (5099)** is debited for the tax amount.
* **Accounts Payable** is credited for the gross total.

Purchase tax does **not** roll into the cost of inventory items. It's tracked as its own expense.

#### Where to See Your Balances

* **Balance Sheet:** Sales Tax Payable shows up under **Other Liabilities** — that's your running balance owed to authorities.
* **Profit & Loss:** Sales Tax Paid shows up under **Expenses** — your purchase tax cost for the period.
* **General Ledger:** Drill into either account to see every invoice, bill, or remittance posting.

#### What now. Does Not Do

* It does not look up tax rates by zip code, state, or county.
* It does not split tax across state vs. local components.
* It does not file returns.
* It does not detect taxable vs. non-taxable line items — the rate you enter applies to the whole document subtotal.

#### Related

* Invoices
* Bills
* Chart of Accounts
* Journal Entries


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