As a small business owner, you need to manage many different expenses, including your business’ taxes. Several aspects of your company will require taxation, as enforced by the government. The amount of money you owe to federal, state, and local tax authorities is your tax liability. Tax money will be used by the government to fund administration and social programs.

As tax liability is a legally binding debt, you are required to pay the taxes you owe or you may face government penalties. Tax liability is a short-term liability, which means that you must pay it within a year. Short-term liabilities, such as tax liability, may be recorded together in your accounting workbook or balance sheet.

Selling a product is a taxable event for which the government may charge you GST.   Instead of paying GST out of your own pocket, you can include the amount in the total price that you charge a customer. After you collect GST, you’ll need to report it and send it to the appropriate government agencies. You can pay GST on a regular basis (quarterly or monthly). Earning income is another taxable event. Federal and state income tax liability is based on a percentage of your earned income.