Why doesn't my sales tax payable account match my sales tax returns?

Common causes: remittances categorized as expense instead of against the liability, rate changes the software applied late, refunds and credit memos that reversed tax differently than the original sale, filed-return rounding and vendor-discount differences never booked, and manual journal entries someone used to force earlier periods. Each leaves a residue that compounds period over period.

Should sales tax collected be recorded as income?

No. Sales tax you collect from customers is money held for the state — a liability from the moment of collection, not revenue. Recording gross receipts including tax as income overstates revenue, and then remittances get expensed to compensate, making both the P&L and the liability wrong. Invoice line items should split sale from tax automatically.

How do I fix a small persistent balance in sales tax payable?

Tie out the recent periods: liability accrued per the books versus tax reported per each filed return versus payments made. Book the identified differences — rounding, timely-filing discounts, penalties — to their proper accounts. A small residue from many old periods, once explained, is cleared to other income or expense with the filing schedule attached as support.

Sales tax liability doesn't match the filings

Symptom

Sales tax payable shows 2,912 when the last return was filed and paid in full — or it runs negative, or it grows a little every month no matter how faithfully you remit. The account and the state's records tell different stories, and nobody can say which period the difference came from.

Why it happens

Remittances expensed. The payment to the state arrives in the bank feed and gets categorized as "taxes & licenses" instead of debiting the liability. The liability never drains; expense is overstated.
Rate changes. The state or locality changed a rate; the software's tax table lagged, so weeks of invoices accrued at the old rate while returns were filed at the new one.
Refunds and credits. Credit memos that didn't reverse tax the way the original invoice charged it.
Return-level differences never booked. Filed returns round; some states allow a timely-filing vendor discount; penalties and interest get added. If the books post only "accrued" and "paid the invoice amount," each period leaves pennies-to-dollars of residue.
Manual adjustments gone wrong. Someone journal-entried the account to match an old return, without documenting which periods — solving one month by contaminating all future ones (/bookkeeping/cleanups-fixes/journal-entry-abuse-cleanup is the general disease).

The fix

Assemble filings and payments for the trailing year (or back to the last time the account provably tied out): each return's tax due, and each payment per the bank statements.
Build a period schedule: accrued per books | reported per return | paid. The account's correct balance at any date is cumulative accrued minus cumulative paid, and the accrued column should track the returns.
Recategorize misposted remittances from expense to the liability — edits to the original transactions, not entries.
Book the return-level differences you identified, each to its real home:

Journal entry — Recording filing differences the books never captured

Account	Debit	Credit
Sales tax payable	118
Interest & penalties expense	45
Other income — vendor discount		37
Cash (additional remittance)		126

Illustrative combination: rounding and discount clear the liability's residue; a penalty is expensed, not buried in the tax accounts. Attach the period schedule as support.

Clear the explained residue. Once every period ties, any last small unattributable balance from ancient periods is written to other income/expense with the schedule attached — a documented conclusion, not a plug.
Escalate real under- or over-remittance. If the schedule shows tax collected but never remitted, that is money owed the state (often with lookback exposure); talk to the preparer about filing corrected returns before adjusting anything. Overpayments are refund claims with deadlines.

How to prevent it

Tie the account to each return as you file it — accrued, reported, paid, differences booked — while the period is fresh. Ten minutes per filing, and the account can never drift more than one period.
Set a bank rule so state tax payments post against the liability, never to expense — the same rule-based discipline that keeps payroll liabilities honest (/bookkeeping/cleanups-fixes/payroll-liabilities-wrong).
Verify tax tables after every announced rate change, and spot-check one invoice the day it takes effect.
Ban undocumented journal entries to the account. Any adjustment carries a memo naming the filing period it relates to, so the next tie-out inherits an audit trail instead of a mystery — the standing monthly scan in /bookkeeping/cleanups-fixes/diagnosing-balance-sheet-problems will catch anything that slips through.