GREENBACK BLOG

All Things Sales Tax

Mar 11, 2019

Let's talk about our favorite topic. Taxes! Sales taxes to be specific. Greenback handles sales taxes in a number of ways depending on the transaction type (sales vs. expenses) and the accounting platform.

Expense Transactions

The major accounting programs, think QuickBooks and Xero, don't support separating sales tax from your expenses for US customers. If your Delta Airlines ticket has $65.38 of sales tax, you'll be exporting the entirety of that transaction to the appropriate "Travel" expense account. However, most accounting programs do allow for the itemized accounting of sales taxes for International customers. Greenback will allow you to associate the sales tax to a pre-defined account in these cases.

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Sales Transactions

The major accounting programs, think QuickBooks and Xero, don't support separating sales tax from your expenses for US customers. If your Delta Airlines ticket has $65.38 of sales tax, you'll be exporting the entirety of that transaction to the appropriate "Travel" expense account. However, most accounting programs do allow for the itemized accounting of sales taxes for International customers. Greenback will allow you to associate the sales tax to a pre-defined account in these cases.

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Marketplace Facilitator (Automatic) Sales Taxes

A Marketplace Facilitator is defined as a marketplace that contracts with third party sellers to promote their sale of physical property, digital goods, and services through the marketplace. This means most of the selling platforms today (Etsy, Amazon Seller, etc.) are going to collect the appropriate sales tax on your behalf.

Marketplace Facilitator legislation is a set of laws that shifts the sales tax collection and remittance obligations from a third party seller to the marketplace facilitator. The marketplace facilitator will now be responsible to calculate, collect, and remit tax on sales sold by third party sellers for transactions destined to states where Marketplace Facilitator and/or Marketplace collection legislation is enacted.

So… how does Greenback help?

Greenback will define Facilitator Taxes as "Automatic Sales Tax" within your transactions and will treat them as an expense line item. We do this because the burden of collecting and reporting sales tax now belongs with the marketplace. The Marketplace will simply expense the taxes back to your marketplace account. In the example below, the Etsy seller sold a $5.00 postcard. Etsy automatically adds $0.51 of sales tax in which Etsy will collect and report. Greenback will show you both the total of each item within the transaction charged to the customer, as well as the fees charged back to you the Etsy store owner in service of the automatic sales tax. In this example below, Greenback itemizes out both the facilitator tax as well as the processing fees Etsy has charged to the store owner.

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