INCOME AND SALES TAXES, AND OTHER DERIVED TAX REVENUES
Income taxes often represent a significant source of revenue to some governments. Sales taxes are another common form of significant revenue provider that is used by governments to fund operations. In addition, other forms of derived taxes, such as cigarette taxes, provide revenues to many state and local governments.
What these taxes have in common is that they are derived from taxes imposed on exchange transactions. Prior to GASBS 33, these taxes were called taxpayer-assessed revenues, since they required some type of tax return or form on which the taxpayer calculated the amount of the tax due to the government.
On a modified accrual basis, the revenue from these taxes is fairly easy to determine because the availability criteria focus governments’ attention on the collections from these taxes shortly after year-end. In practice, many governments have been using a one-month or two-month collection period after year-end (depending on the nature of the tax and how and when tax returns are filed) to determine the amounts that are recorded on the modified accrual basis. On the accrual basis, revenue recognition becomes more complicated in that estimates of what will be ultimately received for taxes imposed on exchange transactions occurring during the governments’ fiscal year are required. Since many governments do not have fiscal years that match the calendar year and since many of these taxes are based on calendar-year tax returns, the calculations are further complicated.
Taken From : Governmental Accounting Made Easy