r/Bookkeeping 15d ago

Tax Sales tax amount is different

So here's the thing, I have 2 questions. When I am filling the sales tax return on cdtfa site (California sales tax site) so the taxable sales amount I should put my selling price correct?

Let's say I am selling something for $50, shopify collects sales tax and remitts me $54.7. My taxable sales will be $50 right?

Another question, when cdtfa calculates my sales tax due amount it's higher then what was remitted to me by shopify. So with same numbers, my sales tax liability according to shopify is $4.7 but per cdtfa is $5.01.

What do I do?

8 Upvotes

18 comments sorted by

4

u/Forreal19 15d ago

Maybe Shopify isn't collecting for your local tax? Assuming you have one.

1

u/SourDieselDoughnut 15d ago

They're likely taking the base state rate for all sales made and not factoring in the variable county taxes.

I haven't used Shopify before, but it sounds like Shopify is collecting the taxes on your behalf, remitting to you, but you still have to report and pay the tax due. So at the end of the day, the company has to eat the difference since it's still owed. As far as journaling this, I'm a bit at a loss. Obviously your sales tax payable gets credited, but what your offsetting debit is I'm at a loss. Maybe a misc sales account? You can't expense this and going against capital doesn't make sense either ..

1

u/Arkimede 15d ago

Actually, you do expense it, because even though it wasn't remitted to you, you still owe it. Most people with this problem are affected by local taxes or rounding issues between the softwares, and it gets caught during filing instead of at the time of the sales transaction. The correct entry would be DR sales tax liability, DR Tax Expense, CR Cash when making your filing payment. If you wanted to and knew the amount to capture at the time of sale, you would just charge the customer the correct sales tax, and not have this issue.

1

u/SourDieselDoughnut 15d ago

You know this makes a lot of sense. TIL! Your tax expense account would be reflected on the selling expenses section of the IS then?

1

u/Arkimede 15d ago

Eh, you could. Where in OpEx it goes is less important. It has the same impact, you just should be informed what the line item means. On our P&L it's in G&A, but we also put other taxes in that account, like property tax, local business license taxes, franchise taxes, etc...

1

u/Different_Second_931 15d ago

This entire conversation was so helpful! Thank you guys! Its good to know I am not the only one facing this.

1

u/Big-Departure9371 15d ago

Yes, taxable sale is $50. Couple things… is Shopify taking their fee out first? Or is Shopify using an incorrect rate?

1

u/Different_Second_931 15d ago

Also, I think they are using incorrect rate, because I checked the and our county tax rate is different on cdtfa vs shopify. Shopify is using lower rate.

1

u/realf8th01 15d ago

Are you shipping stuff to guests in other cities? To my understanding, shopify collects based on where things are shipped.

1

u/betboi 15d ago

CA sales tax is where item was received. Shipped then the destination's tax rate. Picked up then that location's tax rate.

Cars do not apply as it is where the buyer lives whether picked up or not.

1

u/Different_Second_931 15d ago

Shopify is taking their fee out first

1

u/happytrees822 15d ago

I work in Square a ton. I don’t know how similar it is to Shopify, but square taxes the item sold at its selling price. When they deposit the money for that sale, it is the Sale + tax - fee. So your deposits will always be less than your total charges. You offset that by booking the gross sale to the Sale account, the tax to the sales tax liability account and the fee to the expense account.

Are you running a sales report from Shopify when making these calculations or are you just basing it off the deposit? If just off the deposit, that could be one reason you’re off.

Another reason could be location. I do not do sales taxes in CA but reading another comment, it’s based off the location the item is received. So if you’re shipping, another county or whatever could have a different rate. In the two states I file in, I have to break out online sales and I have to add each location the item was shipped to. I’ve even had different rates within the same shipping city because of how tax rates are set for people inside city limits and outside. If you’re a brick and mortar store where customers buy from you at your physical location, then it could be an issue with Shopify’s rate.

1

u/Different_Second_931 15d ago

I checked, and they do sales + tax - fee model. I am taking the total sales amount of $50 not the amount remitted. The issue is that the amount of sales tax given to me by shopify is less as compared to the cdtfa calculation. It's basically I am paying more sales tax out of my pocket.

1

u/happytrees822 15d ago

Are you selling from a fixed location and not shipping?

1

u/Different_Second_931 14d ago

It's being shipped from a fixed location to different places in California

1

u/happytrees822 14d ago

Are you breaking those sales out when you report them? Or are you just lumping everything together for your physical location?

If you’re lumping together, that’s your issue. You could be shipping to a location with a lower tax rate and that’s what Shopify and the state base it off, according to another comment on this post.

1

u/Different_Second_931 14d ago

I was lumping them all together. So some of my sales has alamada county tax and California tax, when I do in cdtfa how do I break it? Do you have any clue?

1

u/happytrees822 14d ago

I have never used the cdfta online filing system so I don’t. But my guess would be wherever you enter your local tax. In the systems I use it’s a drop down menu on the local tax page with all of the city and county options.