Sales Tax Report will list the net liability that is to be paid by the business to the tax collecting authority. This report will include all the tax components grouped together based on tax name and applied tax rate whether it be Payables or Receivables.
For instance, this is how Paula's Pies taxes are set up.
According to the taxes used in the transactions, Sales Tax Report will look like as below.
Effects of recoverable and non-recoverable taxes on sales tax report
You are very likely to collect sales taxes from your customers and then remit this tax you collected to the government. At the same time, you are a consumer too and pay taxes on the items you buy or the services you hire for your business.
The tax collected from the sales that is payable to the government in full regardless of what you may have paid (in purchases for your business) is categorized as a Non-Recoverable Tax. But when you are able to deduct the taxes you have paid from the taxes you have collected from sales, it is a Recoverable Tax.
In the above screen, all the taxes collected in sales will be categorized as Payables and the taxes paid, whether in bills or purchases and are recoverable, will be Receivables.
These taxes, as it is assigned to Payables and Receivables, affects the Sales Tax Report and thus it becomes important that you create your taxes carefully. Once a transaction is posted, you are unable to edit the tax or the report.