Sales tax and cash versus accrual reporting

The accounting method you use—cash basis versus accrual basis—can affect the amount of sales tax you owe for each period you make sales tax payments.

Cash basis means you report your income when you receive it. Accrual basis means you report your income when you bill it.

Here's an example:

Let's say you sent out a $1000 invoice in August, with a sales tax rate of 6%, making the grand total $1060. You receive a $424 payment in August, and the remaining $636 in September.

• With cash basis, your sales tax owed would be two amounts: $24 for August and $36 for September, because you received payments in both in August and September.
• With accrual basis, your sales tax owed is one amount: $60 for August, because you invoiced your customer in August.

The Sales Tax Center can show you the difference in sales tax owed using cash versus accrual methods. Just select one method or the other in the Accounting Basis dropdown at the top of the Sales Tax Owed table.

Note: If you're not sure what basis to use, be sure to check with your accountant for advice about the best method your business.