Taxes payable are the amount of money a company owes in federal, provincial and municipal taxes. Harmonized sales tax (HST), income taxes and property taxes all contribute to taxes payable and appear under liabilities on the balance sheet.
As taxes payable are a current liability, they must be paid within a normal operating cycle (typically less than 12 months).
Taxes payable are accrued expenses and are placed on their own line on the balance sheet because the amounts can be large and, in most cases, are estimates.
Paying taxes is mandatory according to municipal, provincial and federal laws. Non-payment prompts aggressive collection, which can result in legal action against a business. Paying taxes on time is critical.
More about taxes payable
The balance sheet below shows ABC Co. had $5,000 in taxes payable as of March 31, 2012. The small amount suggests the company is paying its taxes on schedule.