It is the amount of Sales tax that you collect on behalf of the State and that your customers must pay when they make purchases from you, in addition to the price excluding Sales tax. The term collection is very important to understand here: as a collector you are only an intermediary. This money is not intended for you, since you will have to pay the entire amount to the State every month or every quarter.
You sold a service for 1000 € HT with a Sales tax rate of 20%? This makes you € 1,200 in total, including € 200 that you must reimburse to the State. The use of the sales tax calculator zip code this is important.
Deductible Sales tax
Here we have to do the opposite reasoning. As soon as the company makes a purchase in France, it must also pay the applicable Sales tax. However, these amounts of Sales tax are not added to your charges: they are deducted from your collected Sales tax.
If for example you made a purchase of 200 € HT with a Sales tax rate of 10%, this gives you an amount of 20 €. It is this amount that you will be able to deduct from the Sales tax that you have collected, and that you will have to pay back to the state
Sales tax credit
At the end of the month, you will have an overview of your purchases and sales. And in the event that your deductible Sales tax is higher than your collected Sales tax, this means that the State is indebted to you and that you can ask it to pay you a Sales tax credit. Two options are then available to you:
You can ask the State to reimburse you the amount due directly
Or keep this Sales tax credit to deduct it from the Sales tax collected the following month
You may find yourself in this situation if:
You make very expensive purchases or in large quantities but find it difficult to sell
You buy at the standard rate of 20%, then sell at a lower rate (in the restaurant industry, or in the building industry, for example)
Sales tax payable
If, on the contrary, it is your collected Sales tax which is higher than the deductible one, this means that you will have to pay this surplus to the State.
If the definitions are clear, we will be able to move on to the calculations. But don’t leave right away, let’s see, they are simple, we promise.
- Calculate Sales tax: the different operations
- Calculation of the amount of Sales tax from a price excluding Sales tax
The calculation formulas are as follows:
- Sales tax amount = Price excluding Sales tax * Sales tax rate
- Amount including Sales tax = Amount excluding Sales tax + Amount of Sales tax
- Example with a product costing 200 € and a Sales tax of 20%.