A tax authority can require that the company must record sales taxes on prepayments from customers, although a sale has not been made. To set up sales tax on prepayments:

  1. Click > .

  2. On the tab, select the check box. Sales tax is calculated and posted whenever a prepayment is posted.

  3. In the field, enter a posting profile that defines the ledger account to which the sales tax transactions on prepayments are posted temporarily.

    Note Note

    You create a posting profile for this purpose in the form and specify the appropriate ledger account on the tab in the field.

  4. When you post a prepayment through a journal, select the check box.

    Important Important

    If you omit this step, the sales tax is not posted correctly.

When a sales invoice is created and the prepayment is settled, an automatic transaction on the sales tax prepayments account offsets the first temporary sales tax transaction.

See Also