Explain why the account sales tax payable is credited when a sale is made subject to a sales tax?

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Reasons Why Account Sales Tax Payable Is Credited
Sales taxes or the Value Added Tax refers to a liability account stored as the total amount of sales taxes that a business has collected from customers on behalf of a governing tax authority from the sales of goods and services. The company that makes the sale collects the sales tax acting as the state’s tax collector, which has to be remitted as an indirect tax. It means that the ultimate customer bears tax burden. A firm acquires goods from the suppliers and also pays taxes for them which it would recover from the tax authority. Melville (155) alludes that the tax paid is thus the difference between the sales tax paid on purchases (input tax) and the sales tax it collects from the customers (output tax). However, if the output tax is more than the input tax, the organization should recover the difference from the tax authority which is mostly carried forward to be offset in the next trading period. Sales tax is a credit on the basis of a tax agent for the government.
It is assumed that all the participants in the supply chain can pass the taxes paid to their customers unless they are the final consumers. In this regard, the crediting the sales tax account occurs because the firm is only collecting the tax on behalf of the government and it cannot be shown in its records as part of income (Melville 154). Hence, the recorded sales revenue is net of any sales taxes that the customers have paid.

Sales involving sales tax are thus recorded as follows:
Dr Cr
Cash / Receivable (Gross amounts) XXX Sales (Net) XXX
Sales Tax Payable XXX
In conclusion, the sales tax is a credit account since the firm is acting as a government agent. Occasionally, debiting the sales tax payable account happens when the tax has already been remitted. The payable account will reflect a credit for a number of sales taxes collected on the sale. It is a credit because the balance of the Sales Tax Payable account is increasing (Van, 026). The remaining dollars collected from the sale will be journalized as a credit in the Sales account as revenue because the account total is increasing as well. In the end, the Accounts Receivable debit and the credits to the Sales Tax Payable and Sales accounts will balance.
Works Cited
Melville, Alan. Taxation. Harlow: Pearson Education, 2013. Print.
Van, Dorn W. G, and Andrew C. Bailey. Taxation. Eagan, Minn: Thomson Reuters, 2013. Print.