Is Sales Tax Considered In Sales Revenue?

No. The sales taxes collected in retail aren’t included in earnings figures. Hence, sales tax isn’t displayed in an income report. The collected sales tax is listed as a current liability until it is remitted to the government.

As an example, let’s suppose that a retailer’s products face a state sales tax of 8.5%. If the retailer sells $1000 of products for cash, his or her business will collect $1085 in total, with $85 as sales tax revenue. This is marked as 1) a debit to Cash for $1085, 2) a credit to Sales for $1000 and 3) a credit to Sales Taxes Payable for $85. Remember that the Sales account did not show the $85 of sales taxes.

When the business remits the sales taxes to the government, the liability account Sales Taxes Payable is debited.