Hi John. Typically you will do cash basis.  This is the only way that IRS calculates taxes. 
 

This would be the same for Sales tax however, I don’t charge it and that way I don’t have to keep track of it nor pay it to the franchise tax board. 

Hi ​@John Nelson , great question!

We typically review P&Ls on an accrual basis, as it offers a clearer and more accurate picture of a business’s financial health by recognizing revenue and expenses when they occur, rather than when cash changes hands. Just to clarify as well, the IRS allows businesses to choose between cash basis and accrual basis for tax reporting, depending on the size and structure of the business. While cash basis is common for smaller businesses, it’s not the only method used. That said, cash basis is the most common.

As for sales tax I agree, we handle it on a cash basis, meaning we only pay sales tax when the payment for a sale is received. However, even if sales tax isn’t being collected from customers, there may still be requirements for reporting or remitting sales tax to the Franchise Tax Board, depending on local regulations and your business structure.