What Is the Difference Between Sales and Use Tax?

Sales tax is the tax paid by industrial enterprises during the sales process and paid directly from sales revenue. Including product tax, value added tax, sales tax and city maintenance and construction tax. Product tax is calculated based on the product sales income and the corresponding product tax rate. Value added tax is calculated based on the value-added portion of product sales income (the balance of product sales income after deducting the value of purchased raw materials and other items) and the prescribed tax rate Business tax is calculated according to the income of industrial operations such as processing and repairs and non-industrial labor services such as transportation, and the prescribed tax rate. Urban maintenance and construction tax is calculated according to the product tax, value-added tax and the prescribed tax rate. ^[1]

Sales tax

Sales

Taxable Supply Taxable Supply When the goods and services meet the following six elements, the goods and services supplier (that is, the business operator) needs to collect 10% from the buyer (customer) on behalf of the government

Product (commodity) sales tax and surcharge

Product sales tax and surcharges refer to sales tax and education surcharges that should be borne by sales of products and provision of industrial labor services, including business expenses, consumption taxes, urban maintenance and construction taxes, resource taxes, and education surcharges.

The main business tax and additional accounting related business tax, consumption tax, urban maintenance and construction tax, resource tax and education surcharge related taxes.

Real estate tax, vehicle and vessel use tax, land use tax, and stamp duty are calculated in the "Administrative Expenses" account and not in the undergraduate account, but real estate tax and land use tax related to investment real estate are calculated in the account.

Urban maintenance and construction tax rates are specifically implemented in different proportions of different time zones, that is, different proportions of tax rates are set according to different administrative areas such as the city, county or town where the taxpayer is located. The specific provisions are:

(1) Where the taxpayer is located in the urban area, the tax rate is 7%. The "city" referred to here refers to the city approved by the State Council for the establishment of a municipal system, and the "urban area" refers to the regional scope of a municipal area (including suburbs) approved by the provincial people's government.

(2) The tax rate of the taxpayer's location in the county or town is 5%. The "county towns and towns" referred to here refer to the county towns and county-administered towns (district-level towns) approved by the provincial people's government.

(3) If the taxpayer's location is not in the urban area, county seat, or town under the jurisdiction of the county, the tax rate is 1%.

(4) If the taxpayer pays the town tax, consumption tax and business tax in a foreign place, the urban construction tax shall be calculated at the applicable tax rate in the place where the tax occurs.

Education surcharge levy rate (note that it is not a tax rate): In accordance with the spirit of the State Council's "Emergency Notice on Education Surcharge Levy", the education surcharge levy rate is 3% of the "three tax" tax.

The basis for calculating urban maintenance and construction tax and education surcharge refers to the "three taxes" such as value added tax, consumption tax, and business tax actually paid by the taxpayer.

The difference between product sales tax and surcharge and tax payable

According to the regulations of the enterprise accounting system:

1. "Product sales tax and surcharge" subjects belong to the category of profit and loss, accounting for taxes and surcharges that enterprises should bear in daily production and operation activities, including consumption tax, sales tax, urban maintenance and construction tax, education surcharge, resource tax, land value added tax, etc . Here, the tax referred to refers to the tax (excluding VAT) that the enterprise should bear during the sales process. Taxes payable outside the sales process are included in management expenses, construction in progress, inventory and other subjects according to different circumstances.

2. The "Tax payable" subject is a liability subject. It calculates various taxes payable by the enterprise, including taxes other than stamp duty, cultivated land occupation tax, and other taxes that do not need to be expected to be paid.

An example might help your understanding. The relationship between "product sales tax and surcharge" and "tax payable" is equivalent to the relationship between "raw materials" and "accounts payable". Audit Procedure "title = '1'>

Product sales tax and additional audit procedures

client:		signature	date
Audit items: product sales tax and additional audit procedures	Editor			The index number
Accounting period:	Reviewer			Pages	1
I. Audit objectives
1. Determine if the product sales tax and additional records are complete; 2. Make sure that the product sales tax and additional calculations are correct; 3. Determine whether the product sales tax and the disclosure attached to the accounting statements are appropriate.
Audit procedures				Implementation statement	The index number
1. According to the approved provision of labor services, transfer of intangible assets or sale of real property, the business tax payable for the year shall be calculated at the prescribed tax rate; 2. Calculate the consumption tax payable in the current year based on the approved sales of taxable consumer goods at the prescribed tax rate; 3. Calculate the resource tax payable for the current year based on the amount of taxable resources tax products that have been approved and the applicable tax rate specified; 4. Check whether the calculation of urban construction tax and education surcharge is correct; 4. Verify that product sales taxes and surcharges have been properly disclosed on the income statement.