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Scenario: In April, your customers redeem $75 worth of the gift cards sold in March, with a sales tax of 6%.
Sales Tax = $75 x 6%
Sales Tax = $4.50
Sales Revenue = $75 - $4.50
Sales Revenue = $70.50
Debit to Deferred Revenue because our customers had $75 stored in gift cards that we no longer owe to them as future sales, and liabilities (Deferred Revenue) have a normal credit balance.
Credit to Sales Tax Payable because we now owe $4.50 to the government in sales taxes, and liabilities (Sales Tax Payable) have a normal credit balance.
Credit to Sales Revenue because after setting aside money for sales tax, we made $70.50 in sales revenue, and revenue accounts (Sales Revenue) have a normal credit balance.
