Absorbed sales tax is a liability you can incur whenever your company is liable for tax but does not charge it to the customer. For example, if you give an item to a customer, you may still pay tax even though the item’s sales price is zero. Absorbed sales tax is also called withheld or retained sales tax.

Use Tax Rate Maintenance to specify the GL accounts and sub-accounts for Sales Tax Absorbed. To designate a tax rate as an absorbed tax, set the field to Yes.