Auto Repair Shop Books Cleanup Collected tax is not income
The amount the ticket called tax is being held. Labor leaves it alone, and parts leave it alone.
The line with someone else's name on it
When a shop collects tax, the shop is holding money that belongs to the state where the shop sits. That amount is a liability until it is remitted. Posting it to sales makes the month look stronger than the work was, and it makes the later payment look like an expense that came out of nowhere. The payment is the liability leaving. The income never included it.
Some states tax labor and parts. Some tax parts only. Some tax neither, on a given repair. We do not print a percent, because the percent is that state's and it moves. What travels from state to state is the habit of putting the collected amount on its own line. If only the parts were taxed, the labor line carries no tax. If both were taxed, the tax is still one liability, not a seasoning sprinkled into income.
The deposit is smaller than the tickets
A processor fee comes out before the bank sees the money. The fee is an expense of collecting. It does not reduce the tax liability, and it does not reduce the labor. A deposit that is short by the fee should still tie to tickets minus the fee, with the tax liability intact. Shops that plug the difference into sales tax spend the next quarter explaining a shortage that was never a tax shortage.
A discount given at the counter reduces the price. It does not reduce the tax already calculated unless the ticket actually recalculated it. We follow the ticket. We do not back into a rate to make the liability pretty.
What to send
One ticket that shows a tax line, and the deposit that was supposed to include it, are enough. We will say whether the tax was posted as income, held as a liability, or mixed into the fee. The return of that money to the state stays on the shop's filing. We do not become the filing.
Send the collected line
You will be talking to the Steven Palmieri practice.