Record and Pay Use Tax in NetSuite

In the United States, when you order goods from Out-of-State, most vendors do not charge you sales tax.  However, you will need to remit the tax for such purchase and this is called Use Tax.  The steps below illustrate the alternate solution on how this can be done in NetSuite.

1. Create a Tax Control Account for the Use Tax.  The purpose of this is to separate Use Tax from Sales Tax.
  a. Navigate to Setup > Accounting > Tax Control Accounts > New.
  b. Select the Nexus/State.
  c. Enter the Name and Description i.e. Use Tax.
  d. Click Save.

2. If you will be recording the use tax to a different expense account, make sure to create one.  To create a new account:
  a. Navigate to Lists > Accounting > Accounts > New.
  b. Type = Expense.
  c. Enter Name.
  d. Click Save.

3. If the tax agency to which you will be remitting the tax is not yet setup in NetSuite, then you have to create a tax agency.
  a. Navigate to Lists > Relationships > Vendors > New.
  b. Enter Company Name.
  c. Select Tax Agency on the Category dropdown.  
   **This is under Info tab for the old form while on the Main field for the upgraded form.
  d. Click Save.

4. Create a journal entry to record the Use Tax.  This should be performed each time a user makes purchases with Use Tax.
  a. Navigate to Transactions > Financial > Make Journal Entries.
  b. Select the Expense account that should be debited.  Enter the amount of the Use Tax on the Debit column then click Add.
  c. Select the Tax Control Account created in step #1.  Enter the Use Tax amount on the Credit Column.  Make sure to select the Tax Agency under Name column so that payment can be processed.
  d. Click Save.

5. Process payment for the Use Tax.
  a. Navigate to Transactions > Bank > Pay Sales Tax.
  b. On the Account dropdown, select the bank account from where the payment should be deducted.
  c. On the Other Tax Payable tab, look for the Tax Agency where the Use Tax should be remitted.  Tick Pay box.
  d.  Click Save to generate the check.

NOTE:  While Use Tax is not yet paid, Sales Liability by Tax Item and Sales Tax Liability by Tax Agency will have a variance equivalent to this amount.