Final answer:
Sales taxes collected by a retailer are reported as current liabilities on the balance sheet. These funds are held temporarily and must be paid to the government at a specified future date.
Step-by-step explanation:
Sales taxes collected by a retailer are reported as current liabilities on the retailer's balance sheet. When a retailer collects sales tax from customers, it is collected on behalf of the government. The retailer does not own these funds but holds them temporarily until they need to be remitted to the government.
Therefore, these funds are not considered part of the retailer's revenue or expenses. The sales tax collected is a liability because it is an obligation that the retailer must pay to the state and local government at a future date, usually at the end of each month or quarter, depending on regulations.