How to record a second sales tax rate

This article explains how to record a second sales tax rate in FreeAgent.

If you select two sales tax rates when explaining a bank transaction, creating a bill or out-of-pocket expense, FreeAgent will only record the first sales tax rate in your accounts. Therefore, you’ll need to create journal entries to record the second sales tax rate in FreeAgent.

You’ll need full (level 8) access to your FreeAgent account to do this.

You can download a chart of accounts to view a list of all the available categories in FreeAgent and create custom categories if you need to. Accounts with numbers 001 to 599 are profit and loss accounts and those with numbers 600 to 999 are balance sheet accounts.

If you’re unsure which journals are required or how much tax is due, please speak to your accountant.

Recording a second sales tax rate

Navigate to the ‘Accounting’ tab at the top of the screen, select ‘Journal Entries’ from the drop-down menu and select ‘Add New Journal Entries’.

The journals you’ll need to create depend on whether you'd like the second sales tax to be included on your sales tax report or not.

Including the second sales tax on your sales tax report

To show the second sales tax on your sales tax report, you’ll need to create the following journal entries for the amount of tax due, depending on where you want the tax to show in the report:

• Debit code ‘818 - [X] Reclaimed’ (which will show within the first sales tax ‘Reclaimed on Purchases’ section of your report)
Or
• Debit code ‘822 - [X] Charged’ (which will show within the second sales tax ‘charged on Sales’ section of your report)
• Credit entry to the relevant spending category

Not including the second sales tax on your sales tax report

If you don’t want to show the second sales tax on your sales tax report, you’ll need to create the following journal entries for the amount of tax due:

• Debit code ‘821 - ‘[X]’
• Credit entry to the relevant spending category

Please note that although the second sales tax won’t show on your sales tax report, it will be recorded on your Show Transactions report.