What Is Withheld Tax?
Marketplace Facilitator Tax is a tax collected and remitted by Amazon, eBay, and PayPal on your behalf, due to agreements with the specific states in the USA.
The trading platforms have been making agreements with states to collect and remit taxes on your behalf, thus lifting up this burden from your shoulders. However, these taxes are still to be accounted for in your books, as they are associated with your business.
How Does Synder Record Transactions with Tax Withheld by Amazon/eBay/PayPal?
The transactions that we receive from payment platforms contain tax which is supposed to be reflected in the books according to accountants, even if you don’t receive the amounts and are not liable to remit them to tax agencies. This is why Synder records tax amounts in the income part of a transaction (sales receipt) – and then also in the expense part of the transaction, along with the fee, thus effectively canceling them out.
(total amount + tax amount) – (tax amount + fee) = total amount – fee.
So in your QuickBooks/Xero you are going to have Invoice\Sales Receipt for the total amount with the tax inside. And you will have an expense which shows in one line how much fee you have paid to the payment processor and in another line that the tax amount has been paid (and your business no longer owes it).
You can select the category needed for the tax portion of the expense in Synder settings -> Taxes tab, as the screenshot below shows.
How Should I Categorize Marketplace Facilitator Tax?
The shortest answer would be: ask your tax advisor, as this would guarantee that the answer will be correct for your bookkeeping flow. However, below are a few recommendations on how tax is handled in accounting.
Regularly a tax expense is a liability owed to a government agency within a given period, however if the tax has been paid out to the agency incharge by the facilitator it is an expense for you.
The tax payable is the actual amount owed in taxes based on the tax code rules. The payable amount is recognized on the balance sheet as a liability until the company settles the tax bill.