Final answer:
The incorrect statement is that sales taxes are an expense of the seller; they are actually collected by the seller as a liability. Sales taxes are calculated by multiplying the price by the sales tax rate and recorded as a current liability until paid to the government.
Step-by-step explanation:
The statement that is NOT correct about sales taxes is that sales taxes are an expense of the seller. This statement is incorrect because sales taxes are collected by the seller on behalf of the government and are not an expense to the seller; the sales taxes collected are a current liability until they are remitted to the government.
When calculating the amount of sales tax, you can use the provided formula which is the price multiplied by the rate of the sales tax. For example, if you have a $150.00 item with a 10% sales tax assessed, the calculation would be $150.00 x 0.10, resulting in a $15.00 sales tax. This amount is then added to the original price to get the total amount payable.
Sales taxes payable are indeed classified as a current liability because it is an obligation that the company needs to settle shortly, typically within one year. Many companies record sales taxes in the sale account at the time of the transaction to appropriately capture the financial activity as it occurs.