Taxes payable refers to one or more liability accounts that contain the current balance of taxes owed to government entities. Once these taxes are paid, they are removed from the taxes payable account with a debit.
Sample taxes payable accounts include:
- Sales taxes payable (for which the liability is recorded at the time a customer is invoiced, with a debit to the accounts receivable account).
- Corporate income taxes payable (for which the liability is recorded at the end of each accounting period, with a debit to the income tax expense account - assuming there is a taxable profit).
- Payroll taxes payable (for which the liability is recorded when a payroll is calculated, with a debit to one of several possible payroll expense accounts).
Taxes payable are almost always considered to be current liabilities (that is, to be paid within one year), and so are categorized within the current liabilities section of the balance sheet. The various taxes payable accounts may be aggregated into a single "taxes payable" line item in the balance sheet for presentation purposes.