In Money, you can specify whether or not a product or service is usually subject to or exempt from sales tax. You can also set the normal sales tax rate for each of your customers. When you prepare an invoice, you can change the taxability or the tax rate item by item. This allows you to sell a taxable item, for example, to a retail customer with full tax and to a wholesale customer with no tax, or to charge a different sales tax depending on the customer's location.

Money automatically creates a sales tax account when you create your first invoice that charges sales tax. The sales tax identified on your invoices is saved in this account, which appears as a current liability (An obligation to pay. Short-term debt, long-term debt, and certain other obligations appear as liabilities on a company's balance sheet. ) on the balance sheet (A financial statement that shows a company's assets, liabilities, and owner's equity at a given point in time.) . When you record a payment on an invoice, Money allocates the payment based on the categories you assigned on the invoice, including sales tax. If you receive a partial payment, Money allocates a proportionate amount to sales tax.

The Sales Tax account tracks the sales tax you have billed to your customers. If you report revenues on an accrual basis, when you pay sales tax to the government, you pay the amount of sales tax you've billed. To find out the sales tax you've actually collected, create a Sales tax collected report. If you report revenues on a cash basis, use this amount to pay the sales tax set aside on behalf of the government. You can also create a Sales tax paid report to see how much you have already paid to the government.