How do I reconcile my sales tax payable account?

To reconcile your sales tax payable account, compare your general ledger balance with reports from your sales tax engine or marketplace. Identify differences, adjust for timing issues, and document variances. Tools like Avex Rec can automate this process and reduce errors.

Why is sales tax reconciliation important?

Reconciling sales tax ensures your business pays the correct amount of tax, avoids penalties, and keeps books accurate. Regular reconciliation also helps catch reporting errors early.

Sales Tax Payable Account Reconciliation Best Practices

Scott Avery
Aug 31
2 min read

How to Reconcile Your Sales Tax Payable Account

Reconciling your sales tax payable account is an important step in ensuring your business stays compliant and your financial records remain accurate. The process helps confirm that the sales tax you collected from customers matches what you reported and filed with the appropriate tax authorities.

Why It Matters

Accuracy: Ensures that your collected sales tax aligns with your general ledger.
Compliance: Reduces the risk of underpayment or overpayment.
Audit Preparedness: Keeps your books clean and ready for review.

Steps to Reconcile Your Sales Tax Payable Account

Gather Reports
- Pull the sales tax liability report from your sales tax engine or POS system.
- Export the general ledger activity for your sales tax payable account.
Match Collected Tax vs. Billed Tax
- Compare the sales tax billed on invoices to the amounts posted in the general ledger.
- Investigate any variances (e.g., timing issues, manual adjustments).
Verify Payments to Tax Authorities
- Match your payment confirmations to the liability shown in the general ledger.
- Ensure that the payment cleared your bank and reduced the payable account.
Adjust for Differences
- Post correcting journal entries if you find discrepancies.
- Document the reason for adjustments for future reference.
Confirm Zero Balance After Filing
- After remittance, your sales tax payable account should return to zero (or roll into the next period’s accrual).

Common Challenges

Timing differences
Manual data entry errors.
Different reporting formats between systems.

Tools That Can Help

Some companies use spreadsheets to reconcile, but that approach can be time-consuming and error-prone.

For businesses that want a dedicated solution, Avex Rec is a purpose-built reconciliation tool designed specifically for sales tax payable accounts. It matches your sales tax engine reports against your general ledger, helping you quickly spot and resolve discrepancies.

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