INCOME AND SALES TAXES, AND OTHER DERIVED TAX REVENUES (2)
These taxpayer-assessed revenues are difficult to measure for a number of reasons. First, the reporting period for these revenues is often a calendar year, and the majority of governments have a fiscal year that is other than the calendar year, and accordingly there are overlapping reporting periods. Second, the tax returns or remittance forms taxpayers use to remit these taxes are usually not due until several months after the calendar year-end and are subject to extension requests. Third, these types of taxes, particularly income taxes, are subject to estimated payment requirements throughout the year, and the final amount of the tax is determined when the tax return form is actually completed. Finally, since the revenues are taxpayer-assessed, it is sometimes difficult for the government to satisfactorily estimate the amount of tax it will ultimately receive based on historical information, because the taxes are generally based on the relative strength of the economy during the calendar year reported by the taxpayer. Historical information does not always have a direct correlation with the current status of the economy.
In some cases taxpayer-assessed revenues are collected by a level of government different from the government that is the actual beneficiary of the tax. For example, a state may be responsible for collecting sales taxes, although portions of the sales taxes collected are actually revenues of counties or cities located within the state. In these cases, the state will remit sales tax collections to the local governments (counties, cities, etc.) periodically. Similar situations exist where states collect personal income taxes imposed by major cities within the state.
The local governments receiving taxes collected by another level of government should apply the same criteria of recognizing these revenues (i.e., when they are measurable and available).
If the collecting government remits the local government’s portion of the taxes promptly, the local government is likely to recognize revenue in similar amounts to that which they would recognize if they collected the revenues themselves. On the other hand, if the collecting government imposes a significant delay until the time that it remits the portion of the collections due the local government to that local government, consideration must be given to when these revenues actually become
available to the local government, given their delay in receiving the revenues from the collecting government.
Taken From : Governmental Accounting Made Easy