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Setting Up Sales Tax in QuickBooks

February 1, 2011 | By | 295 Replies More

I see a lot of questions about sales tax in the Intuit Community forums, so I’ll give a quick overview of how to set it up in QuickBooks.

Some Concepts

If you are going to charge sales tax on an invoice, several things must be set up:

  • The sales tax preference must be enabled.
  • You need one or more sales tax items and possibly some sales tax groups in your Item List.
  • When you create an invoice, you must have a taxable customer tax code selected, a sales tax item or sales tax group selected for the tax, and any taxable charges must be set as being taxable on the detail line.

Enable Sales Tax

To start, you need to enable the sales tax preference. Select Edit then Preferences and select the Sales Tax prefence. Click on “Yes” for the question “Do you charge sales tax”.

Sales Tax Preference

In the lower half of this screen there are several options to review to make sure they are set properly for your business (how often you pay sales tax, and so forth).

Sales Tax Items

As you probably know, all charges that you add to an invoice must have an entry in the item list. Sales tax is the same. You will create one or more sales tax items in the item list. You can do this by clicking on the add sales tax item button in the preferences screen, or by adding an item to the item list in the normal way.

Sales Tax Item

Enter the percentage for the sales tax, and a vendor for who you pay that sales tax to (typically your state sales tax agency).

Multiple Jurisdictions

So what do you do if you have multiple jurisdictions? You could have a situation where you have a state tax, a county tax, a city tax or even more. When you file your reports to the state tax agency you need to split out the amounts by jurisdiction, usually.

To manage this, create a sales tax item for each jurisdiction. One for the state, one for each county you work with, one for each city. However you need to break it down for your reporting. Then, create a sales tax group item and add each of the jurisdiction taxes:

Sales Tax Group

If you use this sales tax group in an invoice the rate will be 8.1%, but the program will report each tax separately.

Please note that if you have a large number of taxable jurisdictions this can become very complex. You need to have a sales tax item for each jurisdiction, and a sales tax group for each “nexus” or location that has different combinations. There are third party add-on products that help with sales tax tracking, but these usually are reasonable only if you have a large number of invoices to process.

Back in the preferences section, in the dropdown list Your most common sales tax item you can select the sales tax item or group that you most commonly use.

Customers and Items

Now, let’s look at your customers and items. Some customers are taxable, others are not. Some items and services are taxable, others are not. We will set up both to have the usual value for taxation, although you can always override this when needed.

Edit your customer, you can specify which sales tax item or group to use for this customer. Also, the tax code needs to be set – it should be set to tax.

Sales Tax Customer

Edit your items to specify if they are taxable or not – select the tax code of tax.

Sales Tax Part

Putting It All Together

Let’s create an invoice for this customer. The default values for the tax related questions are taken from the customer record and item records used. Three things must be set to have sales tax calculate: The customer tax code must be taxable, the tax item or group must be selected, and the tax setting on the item must be selected. If this all happens, sales tax is calculated properly.

QuickBooks sales tax on invoice

Remember, you can override these if you need to change something for a specific situation. If one line isn’t to be taxable for some reason, change the tax setting on that line to non taxable. If the customer should get a different tax rate, change the tax item or group for the invoice. You can also change the customer tax code.

Reporting

I’ll talk about sales tax reporting in a future article. Note that to get the most efficiency out of your QuickBooks program you want to set up and use your sales tax items properly.

Let me know if this helps!

For another approach to deal with sales tax in QuickBooks see my article on AvaTax Calc, and excellent add-on product that works with QuickBooks to manage sales tax information and reporting.

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Category: QuickBooks Tips/Tricks, Working with QuickBooks

About the Author ()

Charlie Russell is the founder of CCRSoftware. He's been involved with the small business software industry since the mid 70's, and remembers releasing his first commercial accounting software product when you had a one-floppy disk drive system, loading the program from one floppy and then replacing that with the other floppy to hold the data. He has a special interest in inventory and manufacturing software for small businesses. Charlie is a Certified Advanced QuickBooks ProAdvisor with additional certifications for QuickBooks Online and QuickBooks Enterprise. He also is a Xero Certified Partner. Visit his CCRSoftware web site for information about his QuickBooks add-on products. Charlie can be reached at charlie.russell@sleeter.com He is also the author of the California Wildflower Hikes blog Connect with Charlie at Google

Comments (295)

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  1. JERRY says:

    Charlie: Has a bug newly developed in 2011? Seems the sales tax payments are not being adjusted due to a tax credit as has been the case before now. In other words, tax for individual jurisdictions are not adjusted for, example, a sales tax collection credit. Any idea what has happened?

  2. Jerry, I’m not aware of a problem in the latest revision – there were some sales tax issues in earlier revisions, I believe, but I don’t think it related to this. Can you give me a specific example?

    • Rosena says:

      Hi, could you please help me, when I’m setting up a database for the first time, with cash basis reporting, the first month in January, I paid sales taxes for the last quarter of 2013. How do I record those sales taxes in my new database? I’m pretty sure, I deducted those sales taxes from last year’s taxes but in order for my account to be balanced, I have to show them.

      • Rosena, that is something that you should talk to your financial advisor about. There are multiple considerations.

        It also depends on how you set up your accounts in QuickBooks initially. Did you enter outstanding invoices, with the sales tax defined? That would put the amounts into Sales Tax Liability and you have to deal with that in the proper way. Did you just enter a balance forward for your various accounts? Then you wouldn’t be using Sales Tax Liability most likely. Many variations depending on what you have done.

  3. JERRY says:

    Charlie: In the Pay Sales Tax window, the list of Sales Tax items and jurisdictions appear along with the amount due. When adjusting the total tax amount because, in the case of ny, a sales tax collection credit is due, the individual amounts are adjusted. For the first time I can remember, these adjustments aren’t made and the inial amounts remain the same. Paying the new net amount can be done, but company records will show a balance sales tax due because the adjustments weren’t made.

    I thought I would repare the company file but wanted to hear your opinion on what may have happened.

  4. JERRY says:

    Think I found the problem. Will advise. Thanks.

  5. Rebecca says:

    Jerry, What is the answer because I can’t find how to adjust the sales tax. I am paying later so the state is charging me more but I don’t know how to add to the final amount. Ready to pull my hair out.

  6. Cat Taylor says:

    Good article, thanks. And remember, always make new sales tax items when your sales tax rate changes. Just changing the old rate can confuse the relational database that is QuickBooks and corrupt the file. (I just went through this with a client).

  7. Kathy says:

    Okay, here is 1 for you because I’ve exhausted myself trying to find the answer…
    I have a client I am trying to input data from a different software & he MUST have the invoices look identical to what his customers have been receiving. So with that said…I have invoice’s that have multiple state’s on 1 invoice with different tax rates….any idea how I can acheive putting this on a quickbooks invoice???
    For example: customer is being billed at his home off in California but has leased products in MA, GA and IL. All three states are invoiced on 1 invoice.
    HELP!lol

  8. Kathy, if you have just one sales tax applying to a particular item (or several items), then take a look at my article at http://www.sleeter.com/blog/2011/02/quickbooks-sales-tax-different-rates-for-different-items/

    If you have multiple sales taxes applying to the SAME item, you can’t easily break it out without doing a lot of rearranging of the charges.

    Cat, you are right. I have an article in my older blog that I haven’t moved over to this blog, which talks about that very issue. See it at http://qbblog.ccrsoftware.info/2009/04/changing-quickbooks-sales-tax-rates-mid-year/

  9. Linda says:

    Charlie:

    Can you clarify…I am pretty good with dealing with sales tax. My question is why doesn’t the sales tax show up on an A/P report…do I have it setup incorrectly or is this just the way it is?

  10. Linda, Sales Tax doesn’t post to Accounts Payable, so it won’t show on the A/P report. It posts to Sales Tax Payable instead. You would see that amount in your chart of accounts, as well as in the Sales Tax Liability report.

  11. Neelima Garg says:

    Sales Tax Items & Sales Tax Groups have been working like a charm when I followed Doug Sleeter’s instructions years ago. Now I have a dilemma because every quarter up till now has had different sales tax in California. Since I use several jurisdictions this can be a nightmare to set up sales tax for each quarter for that jurisdiction. Also, how to keep history in case of a sales tax audit. Does anybody have suggestions?

  12. Hussain says:

    I have been trying to account for tax in my quick books file , so far i have had no problems with accounting for sales tax , as demonstrated by your kind self. But i ma still not able to account for purchase tax in the system when entering the bills.
    any help with this ,

    Thanks

    • Hussain, that depends on the accounting regulations of where you live, and what you are purchasing. Tax on items may be something that you have to incorporate into the “landed cost” of the item, or it may be an expense, depending on many factors. In any case, it is not a “tax” that you have to report usually, if the items you are purchasing are items that you are using in your business.

  13. Nicole says:

    Jerry,

    How do I change an account that is associated with an item on my item list? For example – if I create an invoice for work I did in New Jersey the invoice is booked against my New Jersey Sales but the account on my item list says New York State Sales Tax Payable.

    • Nicole, are you talking about a “sales tax item”? Because if it is a regular item (service, inventory part, etc.) you shouldn’t be using the sales tax payable account normally.

      If you are using a sales tax item you would want to create a separate sales tax item for the other state.

      If you can be more specific as to what you are doing that would be helpful.

  14. Nicole says:

    Sorry Charlie (also sorry for calling you Jerry).

    Yes, I am talking about a “Sales Tax Item”.

    Let me see if I can better explain this.

    I perform work in NJ, CT and NY. Therefore I have 3 separate “service” items set up for each state. I also have multiple “sales tax items” set up as each state has its own sales tax rate (along with some jurisdictions have their own rates within New York). According to my item list each “sales tax item” is associated with my New York State Sales Tax Payable account. To see if my New Jersey sales were being incorrectly booked against my New York State Sales, I looked at an invoice I recently sent to one of my NJ clients. Under the “Item” on the invoice I have NJ and under the sales tax I have NJ. So I then looked at my sales tax liability to make sure the services were calculated under NJ and they are. However, the New Jersey Sales Tax item on my item list says account – NYS Sales Tax Payable. Shouldn’t it say NJ Sales Tax Payable?

    I hope I was able to clarify things.

    • Nicole, when you look at the sales tax item, what “field” are you referring to? The “Tax Agency” field? Each sales tax item should identify the taxing agency using the Tax Agency field – that is what is used to separate things in the Sales Tax reports.

      Look at the screen shot higher in this article, you see a “sales tax item” window – there isn’t an “account” field there. All sales tax items post to one account, Sales Tax Payable. You don’t have different payable accounts.

      Just to check, are we talking about the Windows Desktop version of QuickBooks here?

  15. Nicole says:

    Each “Tax Agency” Field is correct within each item which is why the sales tax and sales are showing up in the correct state on the sales tax reports.

    On my chart of accounts, I have 3 Sales Tax Payable accounts – NY, NJ & CT. NY is the first account listed which is probably why the anything associated with as a “Sales Tax Item” is going to that “account”.

    If I open the “Item List” I see the following Name, Description, Type, Account & Price and that is where I am asking about changing the “account”. Not in the “Sales Tax Item” window.

    Because you said “All sales tax items post to one account” – Maybe I just need to adjust my settings to remove the “Account” Field column as maybe that is what is confusing me.

    My current version of QB is Enterprise Solutions Contractors Edition 8.0

    • Nicole, I’m sorry, but you are not using the sales tax feature in QuickBooks the way it is intended to be used, from what I can tell. It is difficult to be specific without being able to actually see your data file. Review the article above. It sounds like you are putting your “sales tax payable” accounts in the individual item records, rather than using a “sales tax item” specifically. As you can see above, there is no “account” field in the sales tax item record.

      I recommend that you contact a consultant who is familiar with Quickbooks and how it manages sales tax. You can use the “Find a Consultant” link at the top right of this page. Or if you wish, you can send me an email with your contact information and I can refer you to someone in your area.

    • Doug Sleeter says:

      Nicole,

      Maybe I can add a few key points here just to make sure you’re undertanding QuickBooks items.

      There are several TYPES of items, Inventory, Non-inventory, Services, … a few more… and then Sales Tax Items. As described in this article, Sales Tax items are used to calculate the amount of sales tax to charge when selling “taxable” items (That is, when selling services, inventory, or non-inventory items that are marked as TAXABLE). So each sales receipt or invoice lists which items are sold as well as which sales tax item(s) are used to calculate and accrue sales tax payable on that sale.

      All sales tax items use the SAME general ledger account to accure the tax. By default that account is a liability account called “Sales Tax Payable.” You should NEVER attempt to set up multiple Sales Tax Payable accounts because there is no way to make your sales tax items point to any other account than that default account. So to separately track the sales taxes you’re collecting for each state, you can set up multiple sales tax items (e.g NY tax, NJ Tax, CT Tax) and set their respective rates and “tax agencies” so that the taxes will be tracked separately according to who you PAY the tax to (i.e. the tax agencies).

      So since you’re trying to fix a file that evidently was set up by someone else, you might have a mess on your hands. The ITEMS should point to revenue accounts (don’t try to point them to sales tax payable!). The sales tax items will always use Sales Tax Payable to hold the calculated tax. The sales tax reports will list the amounts in Sales Tax payable, separated by “tax agency”. That is how you know how much is owed to each agency (or state in your case).

      I hope this helps…

  16. Nicole says:

    Well that is a bummer. I was just trying to fix the way QB is currently set up. More of a reason to start with a new fresh version. Thank you for trying to help me. I appreciate it.

  17. Julie says:

    Thanks for the article. One question…is it possible to have multiple Sales Tax Payable Liability accounts? In Utah we pay monthly sales tax but for special events we have to pay that sales tax separately. I do not want them to lump together under one GL account, I would like to have a sub account for the special events.
    Any help there?

    • Julie says:

      Never mind…just read your response to Nicole! THANKS

    • Yup, only one Sales Tax Payable account, if you want the tax to show in the Sales Tax reports. If you want to treat it totally differently, you can create your own Other Charge item for a percentage, but then you lose the special handling that you get from the sales tax system in QuickBooks.

  18. Kristie Gallo says:

    Hi Charlie,

    I have a dilemma that I am hoping you can solve….I have a client that paid sales tax via credit card, but it looks like you can only pay sales tax via a bank account in the Pay Sales Tax screen. Any advice on how I can handle this?

    • Kristie, I don’t usually give very specific answers to specific questions like that, as I don’t have access to your company file AND I am not an accountant.

      In general, I would think that you could generate the sales tax payment in the normal way, changing the check number to something other than a real number (like “DB” or something), but then do some adjusting entries to balance out the checking account and the credit card (which should NOT have been using “sales tax payable” as the account). That would work, but I’m not sure if that would be the best way. You should talk to your financial advisor about this (as long as they understand that you MUST use “Pay Sales Tax” from the Vendor menu to make this payment in QB), or you can find a local advisor who could help by using the “Find a Consultant” widget at the top right of this page.

  19. I have a client that charges tax on every item she sells. Can sales tax be calculated in the aggregate as one line on the bottom of the invoice?

    Thanks in advance.

    Mike

  20. Michael, that is the normal way that you see it, as one sales tax charge at the bottom of the invoice. Are you not seeing that?

    • Here is the question from my client: “I do have one Quickbooks question for you regarding the sales tax. I have to add the sales tax for each item, isn’t there a way I can add the sales at the bottom of the invoice so it applies to all of the items?”

      • I guess that depends on what exactly your client is trying to accomplish. Are they concerned about how rounding is done? sales tax is applied item by item, and that might give you a slighly different calculated value than if you apply it to the total taxable value. If that is a concern, you can put a “subtotal” item after the last detail line, and under that put a “sales tax” item to apply the rate to that subtotal. You hav eto set the “tax rate” in the footer of the invoice to be a zero rate. However, that isn’t as flexible. It won’t print the sales tax in the footer of the invoice, it will just be another line item. It won’t let you use “sales tax group” items.

  21. Chris Smith says:

    Hi Charlie,

    Here’s my dilemma…in the ‘pay sales tax’ window there is a line item which has no item name or vendor name but it has an amount due. I can’t seem to find where the amount is being calculated. QB will not record a payment for this item because there is no vendor to pay. Tried clearing with a Gen Journal entry but QB has to have a vendor. How can I track where the amount is coming from and how can I get a vendor name in the item? Unfortunately, I inherited this problem. Any advice would be GREATLY appreciated.

    • Chris, I’ve not seen that myself. Journal entries won’t do the job. Do you see this in the Sales Tax Liability report? If so, you can drill down to it from there. If you don’t see it there, sounds like a damaged file. You can try doing a “rebuild” of the company file – but you may need to talk to a consultant who can look at your file. ProAdvisors have a version of the software that provides better diagnostic tools.

  22. Mark Richtsmeier says:

    Hi Charlie,

    Our Sales Tax is 3.5% on the first $1000 dollars and then the remainder of the purchase is at 3%. Anyway of doing this without subtotals and then spiliting up an item over $1000 dollars which confuses the customer and can mess up inventory.

    • Mark, off the top of my head I don’t have a great answer for you, although I’ve seen this discussed in other forums before.

      You can add a sales tax item as a line item and enter a specific amount – but you have to do the calculations yourself. There are some cascading issues if you do this, as it affects your reports and how tax shows on the invoice. It is something that you should play with in a test company to see if you like it or not. I’m not necessarily endorsing that approach at this time, as I haven’t fully tested this.

  23. Christy says:

    I have a county showing up on sales tax liability report but when I go to “pay tax” it is not showing up? What do I do to fix this?

    • Christy, hard to say. I would look at the date of the report to make sure it matches the date of the Pay Sales Tax window, to start. You might want to talk to a ProAdvisor to have someone look at the file if you can’t figure it out – people who have the Accountant versions of QuickBooks have special tools that let us look at the inner workings of the file (the “Client Data Review” function).

  24. This may not be a good place to ask this question.. I am a graphic designer. I design business cards and I order them from an out of state printer that does not apply sales tax. I sale the business cards for the same price I purchase them, but I charge for the design and not the card. Do I have to apply sales tax to the sale of the cards? Or do I have to apply the sales tax to the sale as a whole? Hopefully I wasn’t to confusing..

    Thanks in advance.

    • I am trying to figure this out so I can have Quickbooks organized in the legal fashion.

    • Courtney, every state has different tax laws, and I’m not familiar with Louisiana (other than to know that some legal issues are treated VERY different down there!). You need to talk to your state tax agency to get that answer, or your local financial advisor.

      Off the top of my head I would say that in general you would be required to charge the sales tax on the entire amount. However, I’m not a CPA, so don’t make your decision on that. Check with local advisors and officials.

  25. Jeff S says:

    Hi Charlie – I own a very small business of 3 people and we use QB Premeier 2011. We’ve been on QB for nine years total, taking paid upgrades every couple of years to keep the application from Intuit current. We’ve had 4 people as aour accouting manager doing our books over that time period. Some of my accounting managers did not always use the sales tax module and instead just entered a bill to p[ay our state 7% sales tax in Indiana. As you might suspect, our sales tax module is way, way off and we cannot figure out how to adjust it to “start fresh” in 2012. Any ideas you might have would be greatly appreciated! Take care – Jeff

    • Jeff, that is a complicated situation. You would be better off working directly with a ProAdvisor (you can use the “find a consultant” search box on this page) who can look at your specific company file. There are several ways to deal with this and the proper choice depends on a number of factors. You definately have some issues in the sales tax reports if you have been making payments through regular checks.

  26. jill says:

    Hello!

    Here is my issue…

    Our business is based in Idaho where we do not charge sales tax, but we do a lot of business in Washington 7 miles away. We charge a sales tax and it shows up on all of our Sales Tax Payable reports. My question is about deposits.

    When we take the deposits to the bank, we take the amount of the sales tax and put it into a seperate bank account to pay the taxes with. Often we are depositing multiple checks at a time. This becomes a big pain when we are reconciling the deposits because our main business account is always off balance because it includes the sales tax. Is there a way for QB to automatically funnel the sales tax amount from the deposits straight into our sales tax account so everything balances out?

    Thanks!

    Jill

    • Jill, I’m not sure what exact steps you are taking. You have an invoice for $101.00, and $1.00 of that is tax. You are paid with one check. You have to deposit that check into one bank account because it is one check. So how do you move the $1.00 into the other bank account? You need to do something (an adjustment, transfer or some other transaction) to move the tax from the one account to the other. However, that doesn’t affect the sales tax payable – that doesn’t care where the money is UNTIL you “pay sales tax”, which should then be directed to that separate account.

      • Stacy Kildal says:

        They can also, in the make deposit screen (they need to be using undep funds), add a line item posting to the sales tax account.

        Say the total is $10.60, and $0.60 is sales tax.

        One line item will be the 10.60 posting from Undep funds
        the next line will be -.60, posting to the other bank account
        Making the net deposit 10.00

        That will take care of deposits to both accounts at one time.

  27. Chris says:

    Hello, I have a client that creates an Estimate, then creates several invoices off the estimate. when does the sales tax turn into a “sales tax liability” when the estimate is created or when the invoice is created? what if invoices are created in different Quarters? then is the sales tax liability spread across the quarters as well. All sales are in CA.

    • Chris, an Estimate is not a “posting” transaction. It has no effect on your financial statements. It is an offer you make to someone, essentially.

      Sales tax won’t be a liability until you create the invoice. That is the “posting” transaction. So that is when the sales tax liability is updated, and the invoice date is the date used for the liability. Only the sales tax amount in the invoice is posted.

      • Kenneth Mena says:

        Señor Russel, saludos

        Soy de Costa Rica. Tengo un cliente que en algunos artículos paga el 0.13% y en otros el 13%. Como hago para personalizar esto, ya que al asignar el Tax Code al cliente me lo aplica a todas las líneas de la factura?

        • My apologies, unfortunately I don’t understand Spanish.

        • Guess says:

          Señor Mena al igual que lo explica Mr,Russell en sus graficas ,usted solo tiene que agregar los distintos porcentajes de impuestos que paga su cliente y cuando usted haga la entrada de sus jornadas tendra a su disposicion las distintas opciones .Comiense con el primer cuadro en donde tax (impuestos) luego Vea el cuadro en donde dice new item(nuevos articulos)ahi agregue los diferentes porcentaje s con los que o su clientes pagan .Luego si quiere hacer su trabajo super facil ,busque el nombre de su cliente y agregue los diferentes porcentajes que pagan su cliente.Despues de eso cada vez que usted entre informacion d e su cliente aparacera las dos opciones de porcentaje,

  28. Matias says:

    Dear Charlie,

    Excuse my poor English.

    Here in Argentina, we have Sales Taxes for about 21% (called IVA).
    When I Sell Services or Goods, I Charge this Sell Tax Items in the Invoice, generating an Increment in the Sales Tax Payable Account.

    But when I Buy goods or service, I can discharge (or assume as a credit) the same amount of taxes of my Providers Bill.

    At the end of the month, I pay to the State the diference between Sell Tax – Buyed Tax.

    Let me Explain with an example:
    I create an Invoice for USD 1000 + IVA (1210 USD). For this Invoice I will pay to the state 210 USD at the end of the month.
    If I Buy Goods for 800 USD + IVA (968 USD), I Can use this billed IVA to reduce the tax liability. So, I Will Pay to the state only the IVA Sell – IVA Buyed, only 42 USD.

    At the present, I Use the Adjust Tax Liability function to adjust this issues… The Liability decreases and the diference are increment an Income account called Taxes Credit.

    My quetions are:
    1) How can I do to enter my Bills with this IVA Credit for QuickBooks automatically reduces the Tax Liability and Showme how much I will pay at the end of the month?

    Thank You Very Much,
    Regards

    Matias

    • Your English is better than my Spanish by a long shot…

      I’ll assume that you are using the US version of QuickBooks. If you are using a different national version, this might not be the best approach.

      Note that I am not a CPA or accountant. Also note that you should check on your local tax laws to make sure that this works for you. I don’t know your specific requirements for how things are reported.

      In general, you can set up an OTHER CURRENT ASSET or OTHER ASSET account in your chart of accounts that you call something like “Prepaid Sales Tax”. When you create a bill or check, enter the sales tax amount on the Expenses tab using that account. This will help you track the amount of sales tax that you have paid. Then you would use the Adjust Sales Tax Due function, select that account, select “Reduce Sales Tax By” and enter the amount of sales tax you paid for the appropriate period of time.. Later when you pay your sales tax you would see both a positive and a negative amount, I believe, and you would select that.

      You should test this on a trial company before actually implementing it.

  29. Peter says:

    Charlie,

    I have the problem that my customers are used to specific amounts for each product.
    Now switching to quickbooks, these amounts will change and become “ugly”.
    For example, I always charge my customers $560 for an item. That is the price they see on the invoice, and I have a small line saying (of which 10% VAT or $50.90).
    Now switching to quickbooks is it possible to have such a line? Because the way it describes in this article, I would have to sell the item for $509.09 and add another $50.90 for VAT.
    Please advise?

    THANK YOU!

    • Peter, are you using a non-US version of QuickBooks? If so, I’m not sure how they handle VAT.

      • Peter says:

        No I am using a US version of Quickbooks.

        • Peter, I’m not an expert on VAT, so I don’t know if that is suited to using the sales tax feature in QuickBooks, or to use another method. However, if you have a limited number of items, you can use “group” items to handle this. Create a group item, include the product in the group AND include a sales tax item in the group. The group will be the total amount, it will show (if you set the group up correctly) just one line for the item, and you get the proper calculation of tax for the item. This would work even if you have a large number of items, although it gets a bit tedious to set that up.

  30. Trish says:

    Hello Charlie,
    We collect the actual sales tax from the customer. However, when submitting the sales tax to the state, the state requires rounding. What is the best way to account for the difference in the amount collected and the amount paid?

    Thanks.

  31. Doug Sleeter says:

    Trish,
    For the rounding issue, use the “Adjust Sales Tax Due” menu item under the Vendor Menu > Sales Tax.

    In the adjustment, put a positive or negative amount to round to the nearest whole dollar, and code the difference to some expense account such as Miscellaneous Expense.

    • Nancy Dunn says:

      Why does my sales tax report not show total sales for the month?
      I pay tax on PAID BASIS not on Accural. ?

  32. I invoice several clients that have multiple locations and the locations are in different cities throughtout California, thus the sales tax are different depending on the cities. How do I get QuickBooks to report the sales taxes on the sales tax liability report correctly.

    • Tracy, you could set up a different sales tax item for each different location. Then make sure that the invoice uses the proper item. Then each will be tracked properly in the reports.

  33. mel says:

    Hi, im trying to get the tax codes to obtain the subtotal or from a subtotal to get a total. i know that last year was 1.13925… but this is no longer good. if anybody could help me out :) thanks

  34. Marianne says:

    Charlie,
    on my sales tax liability report, why is there a difference in the amount between my tax collected column and the sales tax payable column? I tried to trace the amount from the report but there was no way, it just kept reverting to the same report.

    So, Im not sure how much to actually pay the IRS, the amount figured from the sales or the sales tax payable amount in which it (QB) added 931.23 to the “North Carolina Dept. of Revenue – Other” line? (p.s.: where did this come from?) If I do include it in my payment, what do I categorize it as? T

    Thanks in advance!

    • Marianne, it is tough to give specific answers without seeing your file. You may want to work with a ProAdvisor (you can use the “find a consultant” link on this page) to work with you – people with the Accountant editions have additional tools for sorting out sales tax issues.

      Usually discrepancies come from making journal entries to Sales Tax Payable, or paying sales tax with a regular check, etc. But there are other possibilities. Including file damage (don’t worry at this point, that is not high on the list of possibilities here). In any case, without seeing.

      Two things I’ll point out to look for in the Sales Tax Liability report. First, you can double click on a specific figure in the report (in the columns you refer to) to get a detailed report. That may show you where the figures come from. Second, note that the “collected” figure will be the sales in the period you have selected. The “Payable” figure will include not only those sales, but any unpaid liability you have carrying over from prior periods.

      In general, when you see the “other” notation anywhere in QuickBooks, that means that you have accounts and subaccounts, and you have some payments to both the subaccounts as well as to the account that is the “parent” account – that is the “other” account. Again, you can double click on the line to start to drill down to the details.

  35. sam says:

    can i make that quickbooks should determine if the customer is from my state and if so make him taxable without me setting up each individal customer ? Is there such a option ? Thanks in advance

  36. sam says:

    My customers are being imported from ebay with the address but they are always taxable, How do i make that the customers who there addressses is outside of NY state shouldent be taxable ?

    • Sam, you don’t mention how you are importing from eBay, so I can’t say much. There isn’t a way to deal with that in QuickBooks itself, if you are importing transactions. It is something you would have to look at on the import side of things.

      I was talking to Karen Magno of Baystate Consulting about this. They have an excellent transaction import tool. There is an article on their website that relates to importing from eBay, although it doesn’t address this particular issue (http://support.baystateconsulting.com/KB/a15/ebay-imports-into-quickbooks-using-transaction-pro-importer.aspx ). Essentially, she says that due to the way that eBay presents the data, it would take a bit of manipulation by you, but she did think that it would be something that might be possible. But it wouldn’t be an automated solution.

  37. Brenda says:

    I am having a problem with Sales Taxes.

    We have a Self Storage Unit facility.
    We invoice our clients every month at the 1st.
    Some customers pay early therefore placing their payment in the previous months income.

    I find the sales taxes followes the invoice date not the tax period the taxes were collected.

    I changed sale tax preferences to “cash basis” but this no effect as to the date the taxes were actually collected.

    I’m I going to have to report the sales tax to go with the date of the invoicing?

    I am pulling my hair out. If I can’t figure this out, I’ll be bald in a week!!!

    Brenda

    • Brenda says:

      Charlie,

      Are you there?

    • Sorry, Brenda, sometimes it takes a bit of time to get around to all the blog comments.

      I’ve not use the sales tax preference setting to change it to “cash basis”. However, I would guess (not sure) that if you change it that would only affect new transactions going forward. It is something I’ll have to dig into later on.

    • Also, note, that in some states you are required to collect tax based on an accrual basis

      • Brenda says:

        Doen’t the accrual basis report invoices that have been created but payment has not been received yet.

        This is where my problem starts with sales taxes.
        It is accruing sales tax figures that have not been collected.

  38. cathy says:

    What about sales tax I owe on purchase made online or out-of-state? How do I make a vendor purchase appear in my sales tax payable?

  39. Luis Rivera says:

    Hi Charlie,

    I’m about to open a Yogen Fruz store in Puerto Rico and already bought the quickbooks program. I’ve been playing around with the program so I can have a better understading of it. My question is; Where should I register daily gross sales(Sales + Sales Tax Payable) so I can differenciate Sales from Sales Tax? Because I look in the customer tab and didnt see anything I could use to register Sales. The only way I could think of was to enter them via deposit, but then again didnt know how to separate sales from sales tax.

    Thank You

  40. Calvin says:

    Hi Charlie,

    I am currently reviewing how my company records sales tax. One of the requirements we have to meet is designating the amount of tax dollars collected per income type (labor, materials, rentals..etc). Currently we use the item column to designate each line of an invoice as a certain type of income and from there calculate the sales tax per type.

    This, I feel, is not the best approach, but unfortunately, tax groups seem only designed to be for tax jurisdictions, and does not accept a tax group designed to split taxes between labor, materials and so on.

    Would you be able to point me in a direction I could take to learn more about how I could set up sales taxes in Quick Books to accommodate this requirement?

    • Calvin, I don’t know that I have an answer for you. I’ve not seen a requirement to report sales tax the way that you talk about – usually the primary issue is to calculate the correct amount of tax and accrue it by taxing agency. I’d have to learn a lot more about your requirements, why you need to report this way, and how you create your invoices before I could give you much help.

  41. Josephine says:

    Hi Charlie,

    The problem I am experiencing is when I select the tax item when rasing an invoice, the letter ‘T’ appears next to the amount when the invoice is printed on paper; btw the letter ‘N’ does not appear when ‘Non Taxable Sales’ item is selected on the invoice – can you help?

    Many thanks

    Josephine

    • Josephine, that is a preference setting. If you go to your sales tax preferences you will see a check box, “Identify taxable amounts as “T” for “Taxable” when printing”. You can uncheck that box if you don’t want the items to be marked that way

  42. Becky says:

    I sit on the board of a non-profit organization and have been asked to review and correct some bookkeeping issues with QB 2011. I need to create some invoices to off-set some credit memos that were previously randomly created. The organization does not collect sales tax. When I try to create the invoice, I get a popup message that says I must assign a sales tax code to the line item. When I go to the item list, there is no option for setting a tax rate; I assume because in the company preferences it is set up that we do not collect sales tax. I am unable to create the invoices because of this. Any assistance as to how to fix this issue would be greatly appreciated. Thank you.

    • Becky, I’ve not run across that message myself, and I’ve not been able to set up a test situation that creates that message. I would start by double checking that the sales tax preference is indeed turned off.

      If that isn’t the issue, feel free to contact me directly through the email address in my author profile (at the end of the article), I can take a look at the file and let you know what the issue is.

      • Becky says:

        Thank you for your response to my query. I have checked the company preferences and it is set up that we do not collect sales tax, thus getting the message regarding sales tax makes no sense whatsoever. I’m no expert, but I have been using QB for a number of years and can usually figure out what’s going on, but this has me stumped. I was going to attach the file to an email and send you, but the file is too large. Any suggestions would be greatly appreciated.

    • Ah, now I see it (with your file) – the “sales tax” preference is stuck on internally. Essentially what you need to do is to turn the sales tax preference on, save preferences, then turn the sales tax preference off. That resolves this issue. When you turn the preference on you’ll need to create a sales tax item, you can create one with a 0% rate. You don’t need to set your items and customers to “taxable”.

  43. Shari says:

    How do I get QuickBooks to charge sales tax on finance charge please? It appears that State of MS requires it. Thanks.

    • I’ve not come across a situation where a finance charge would be taxable, Very odd!

      There isn’t a simple way, at least not that I’ve found. You can create your own invoices for the finance charge, avoiding using the automatic system, to manually assess a charge using a taxable item. You can also find the finance charge invoice after it is added and manuall enter a sales tax item as a line item – you have to enter the amount of the tax, as it won’t calculate it for you.

      Best I can come up with.

      • Shari says:

        FYI excerpt from State of MS website:
        Title 35 Mississippi State Tax Commission
        Part IV Sales and Use Tax
        Page 16
        “103 Finance or carrying charge income received by the retailer is subject to sales taxes regardless of when billed. …”

        I saw the same question from someone in MS in another blog and there was never a reply.
        …but thanks for the response!

  44. Fernando says:

    Dear Mr Charles.
    My problem is, we should charge 02 taxes based on our invoice amount, and 1 tax should charge based on invoice amount + other tax . That means tax on tax. Further we should show both taxes separately in invoices according to law.
    In Eg : Invoice amount USD 1000
    Tax A 10% = USD 100
    Total = USD 1100
    TAx B 6% = USD 66 ( 1100 x 6% )
    Grand Total Should be USD 1166
    How we adjust above two taxes in quick books invoice? Pls advice

    • Fernando: I assume that you are not in the U.S.? Perhaps the Maldives? And that you are using the US version of QuickBooks?

      The US version doesn’t support that kind of tax structure as a part of the sales tax feature. We don’t have that kind of sales tax situation. You might look at the Canadian version – although I’m not up to date on the latest taxation laws in Canada these days. They do have a tax on tax situation, but I don’t know how well the Canadian version of QuickBooks deals with that. And, if you already have data in your company file with the US version, you can’t easily convert that to the Canadian version.

      I would not use the “sales tax” feature. Instead I would work with subtotals and an “other charge” item with a percentage. Enter your items to be sold, add a subtotal item. Under that add an other charge item for the 10%. Then add another subtotal. Then add a last other charge item for 6%.

      This gives you the correct amount on the invoice, and it posts the tax amounts to the account you select. What you don’t have is the reporting/payment tracking for sales tax that you get with the “sales tax” feature. But it is still manageable.

  45. Ashley Parker says:

    I work for a company located in NC that is in the business of reselling services, sometimes to a customer that also resells those services again and sometimes we resell the services to the end user. For example:Company A is contracted by McDonalds to install drive thru camers at 1000 different McDonalds located in various states all through out the country. Company A then contracts my company. We then locate and contract different vendors to perform the services. Currently, we collect company A’s resell certificates for each state that the McDonalds are located in because they are not the end user and do not have to pay the sales tax. However from what I have learned about reporting our sales and use tax, we need to report our total gross sales in each state not just our tax exempt sales. How would I track this with the quickbooks online version?

    • Ashley, my apologies, I don’t work with QuickBooks Online. I’ll see if I can get someone to look at your questions.

    • Stacy Kildal says:

      Ashley, I would use location tracking to track sales in QBO – that will enable you to pull reports that show gross sales for each state. Then you’ll be able to run a Taxable Sales Summary report, customize so that locations are displayed in separate columns and memorize. This will give you taxable sales per state.

  46. Ashley Parker says:

    One more question (same person as above) I work for a company located in NC that is in the business of reselling services, sometimes to a customer that also resells those services again and sometimes we resell the services to the end user. When we resell to an end user, For example: We are contracted directly with Panda Express to install new POS machines at their various locations located through out the country. Currently, we are collecting sales tax for each different city and state that the corresponding Panda express restaurant is located in. This is creating quite a hardship on us for having to submit all the sales tax we have collected to each different city,county and state. Should we only be charging NC sales tax, since that is were we are located and Panda Express’s transaction is taking place with us in NC not with the vendors we have contracted?

  47. Stacy Kildal says:

    As far as the reporting goes, I can only suggest you contact the local tax departments to ask how you are required to track it. If you need any help, please feel free to contact me directly. There may be some other solutions, other than QBO that will suit your needs better.

  48. Vanya Tasic says:

    Hi Charlie,

    I have one general question.
    The company I work for was using only on Tax payable account for both tax collected and paid. Now we are switching to 2 general ledger accounts – Tax collected and Tax paid.
    I set up 2 accounts and items assigning taxes, and everything looks fine except when I create and invoice the tax portion gets shown under “the old – tax payable” account and not under the new one.
    Do you know how to correct this and change the GL account for a sales tax item list?

    Thank you,
    Vanya

    • Vanya, if you want to use the sales tax feature in QuickBooks, you can’t change the accounts. sales tax items always work with “Sales Tax Payable” and you can’t change that, unless you totally abandon their sales tax setup.

  49. ally hendrick says:

    I deactivated a sales tax that some invoices were under and would like to know how to reactivate it because some of the invoices were unpaid and would like to know how to get those back

    • Ally, I’m not sure what exactly you are looking for. The invoices would be there, whether you turn off the sales tax feature or not. However, if you have turned the feature off, you just have to turn it back on the same way, by checking off that preference box.

  50. Leanna says:

    How do I set up sales tax for a construction company that gets a 35% deduction on an item before sales tax is calculated

  51. shahji says:

    Hi,

    I have a client who wants to change the account for the sales tax item created in Quickbooks as it is defaulting to wrong account.Please could you tell how can we change the account for sales tax items.

  52. Randi says:

    Can the g/l have more than one sales tax payable account? If yes, how would we accomplish that…? Client is converting from old legacy system and has 1 g/l code for in-state sales tax, and 1 for out of state sales tax…using many sales tax items (over 600) and sales tax groups (less than 600, but alot!)
    Thank you in advance for response!

    • Randi, the sales tax feature in QuickBooks is set up to work with just one sales tax payable account. To see what the payable amount is for any particular tax nexus you would look at the two sales tax reports, which clearly define what the amount is that should be paid to each. That generally works better than trying to look at the G/L accounts, which don’t separate out the amounts due to be paid now from what is due to be paid later.

  53. Randi says:

    Ok, 1 sales tax payable account it is. May I use the g/l account of choice? IE it defaulted to 2550, and I want to use 2300…that should be ok, right?

    • When you turn Sales Tax on, QuickBooks will create an account titled “Sales Tax Payable”. That account is the one that will be used. You can change the account number, you can even change the account name, but that particular account will be the only one that is used. The connection is by the internal ID for the account, not the info that you see on the screen.

      Make sense?

  54. Wendy says:

    I am pulling up the Sales Liability Report and it is showing me the count as other (i.e. Stark Co. – Other) and is not showing up under the vendor to be paid (Ohio Treasurer of State). Any ideas why this would be? It is making my reporting unorganized. I want to look under Ohio Treasurer of State and see which counties, cities, etc. I should pay.

    • Wendy, there are a couple of possibilities, but it is hard to know without having hands on the file. You want to make sure that all sales tax items in the item list have a valid vendor (which they should). The simplest first step is to doucle click on that line in the sales tax liability report to open up a detailed report, which will list the invoices that generated those figures. Then look at the transaction and the sales tax item that was used.

  55. Chris says:

    Sales tax isn’t showing up in the reports I am running. Is there a way to make it show up? Standard Profit and Loss.

    • Chris, sales tax won’t show in a P&L, as it isn’t income or expense. It is an other current liability, so it shows in the balance sheet.

      If you have it set up properly, as discussed, then you see the sales tax info in the two sales tax reports, normally.

  56. Mary in Va says:

    Virginia collects sales tax on gross sales. Quickbooks calculates sales tax on net sale. How do I change this?

  57. Jennifer says:

    Hi Charlie. How do I set up Quickbooks to pay sales tax on rental income only? All of the “Sales Tax Setup” information that I am finding only references how to charge sales tax on invoiced merchandise. Thank you.

    • Jennifer, I don’t deal with rental businesses usually. Rental income is taxable? Seems odd to me. In any case, if your rental income is set up as a service item, you can make that taxable just like merchandise. I’m not sure that I understand what the difference would be in your situation. Can you explain in more detail?

  58. Jennifer says:

    Thank you for your quick response. I should’ve explained that it’s commercial rental income. The sales tax is included in their monthly amount due. I was wondering if there is a way to pay the monthly sales tax directly from the checking account, through Quickbooks. Will I have to set it up as an invoice first, or is there a more direct way? Thanks again.

    • You can pay sales tax any way that you wish, but if you want QuickBooks to track the sales tax liability (as shown above) so that it handles the due amounts for you, then you have to use the system the way it is set up, as I talk about above.

  59. Nash says:

    we are paying sales tax when buying goods and services and charging them when selling them. what I need is to track the paid sales tax when buying to be able to refund it later on. is there a way to do so in quickbooks? am using quick books pro 2011

  60. NICOLE B says:

    HELLO CHARLIE I SEE THAT YOU HAVE HELPED OTHER SO I THOUGHT I WOULD GIVE IT A TRY AND SEE IF YOU COULD HELP ME OUT. I’M IN QUICKBOOKS 2009 TRYING TO INVOICE BUT IT
    WONT LET ME PRINT RECEIPT OR SAVE INVOICE IT SAYS THIS LINE CANNOT HAVE SALES TAX CODE APPLIED. IT ONLY HAPPENS TO A FEW OF MY INVOICES. ANY IDEA WHY THIS IS HAPPENING AND HOW I CAN FIX IT. I APPRECIATE ANY HELP! THANK YOU!!

    • Nicole, I would have to see an invoice where you have this problem to be able to comment on it. For QB 2009 I’ve seen some notes about this error, but only relating to a “finance charge invoice” – an invoice created by the Statement routine to cover a finance charge.

  61. Tanya says:

    Hi Charles:

    Is there a report in Quickbooks Pro 2010 to print a Sales By Customer and have it include my sales tax codes and amounts for each invoice for the month of June so I can export into Excel and reconcile???? I tried to modifying the report but cannot figure out how to include.

  62. Tanya says:

    Thank you but never mind, I figured it out.

  63. J Duarte says:

    Is there any way to update all invoices from one sales tax item to another sales tax item? We used 2 different sales apps that imported sales data into quickbooks and although they both calculated the tax correctly, only one sales tax line item has the correct percentage showing up in the tax liability reports… so it looks something like this….

    Sales Tax – 8.25% $20,000 Tax Rate 8.25% (invoices have tax calculated correctly)
    Sales Tax Account – $30,000 Tax Rate 0.00 (invoices have tax calculated correctly)

    When i drill down into the “Sales Tax Account” list, all invoices have taxes correctly calculated, but the liability report says tax collected was $0.00 for the $30,000 line item.

    I am currently updating every invoice manually to the ‘Sales Tax – 8.25%” tax item dropdown, so that the liability report states the correct amounts.

    Please help!

    • If you look at the sales tax item in the item list it only shows you what the CURRENT rate is set to. It sounds like when those invoices were created that you had a zero rate for that item, and changed it later. Just guessing.

      You can’t change the rate in the list and have it affect existing recorded transactions – that would be a mess if it retroactively changed existing transactions every time a rate changed.

      Within QB itself there isn’t a way to do a bulk change like what you are talking about. You have to edit the rate in each order.

  64. tina says:

    questions on Utility tax – charge for two services water and sewer to customers. Want to put both the water service and sewer service on one invoice. The problem I am running into, is both water and sewer utility tax is different. So need to two lines on bottom of invoice to show both taxes, the water utility tax and the sewer utility tax.

    Thanks

    • Tina, you won’t be able to get two lines in the footer of the invoice for taxes. You’ll have to enter them as separate line items in the body of the invoice if you want to show them as separate items, if you are using “sales tax items” to manage the tax.

  65. tina says:

    thanks. I put my Utility taxes in as separate line items. And at the bottom, add the word blank on the sales tax drop down menu, which made the sales tax block not to show on the printed invoice.
    another question, have you ever heard of billing on invoices for utilities (water or sewer) on an annual basis. Changing and fixing items from a previous employee.

  66. Robin says:

    Whenever I generate a report for sales tax due, I get a portion that is classified as unadjusted sales tax. Why does this happen and how do I correct this for past amounts, present and prevent this from happening in the future? I am sure that I have overpaid taxes.

  67. Amanda Michele says:

    Does anyone have a link to something as informative as this but for Mac Quickbooks 2011, Simple Invoice – setting up sales tax?

  68. Telisa Killion says:

    So I’m printing my sales for one of my vendors but the sales tax amount does not show? How can I make this work?

    • Telisa, unfortunately that isn’t enough information for me to give you an answer. You may want to contact a QuicKBooks ProAdvisor who can look at your setup to see what is going on.

      • Shannon says:

        Charlie,

        Maybe you can help me. I am using QB to create invoices for a service business (flooring company). I am calculating sales tax on the cash basis, so when I created the sale tax tab on the bottom of the invoice, everytime I receive a payment from the customer the sales tax amount for that invoice is being recorded multiple times in my sales tax payable account. Do you know why this is happening? I am running the report on the cash basis, and there is this column that say’s “Paid Amount”, with a random number??

        • Shannon, I don’t work with “cash basis” clients, so I’m not familiar with the issue you refer to. I would recommend that you find a local ProAdvisor who can take a look at your file and determine what is going on here.

  69. Jeff says:

    How do I set up a single price tax amount? For instance, in my case, I need to set up a .10 federal tax on a box of firearm ammunition. This tax is not a percentage, just a set .10 per box of ammo (whether it be a box of 5 or a box of 100 rounds of ammo, it’s still just .10 per box).

    • Jeff, your options are:
      (1) Don’t use a sales tax item, use an “other charge” or “service” item – but then it won’t appear on the Sales Tax Liability reports.
      (2) Create the sales tax item as a percentage, but insert it as a line item (instead of at the sales tax option at the bottom) and remembering to change the percentage to an amount each time.

  70. Gina Palacio says:

    Regarding the cash basis sales tax reporting scenario: The detail report on the drill down from the sales tax liability report is just plain messy and I hope QuickBooks figures out a better way to report it in the future. If a partial payment is made towards an invoice, QuickBooks randomly applies the payment towards pieces of each line item, and I don’t know of a good report that will explain what it did!

    Before filing a return I scan through the detail report just to make sure that I don’t have any obvious clients in the wrong category (such as a homeowner or a business showing up in a non for profit category, or a CT customer showing up in a NY district)but I don’t spend much time trying to figure out what got assigned to where.

    Here are a couple more suggestions you can follow to make sure that the sales tax system is working properly on cash basis:

    Carefully review your A/R aged list before filing a sales tax return to make sure there are no outstanding payments not applied to invoices. Unapplied payments don’t zero out invoices in the cash basis sales tax report – which results in an underpayment of sales tax.

    If you find any unapplied payments from prior periods, be careful about drilling down to the transaction level and directly applying the invoice – you will change the sales tax liability report in the prior period instead of the current period and will end up under reporting in the current period. Go into Payments and apply the credit instead.

    If you need to write off a balance on an invoice, create a credit memo and apply it to the remaining balance on the invoice. You’ll have to look at the original invoice to see what is taxable and what is not and back out the applicable amount of tax – you’ll have to do some manual calculating to figure out how much to credit.

    Also make sure that you use the Pay Sales Tax function (and assign the sales tax paid to the correct line item if you have more than one district) instead of writing a check and using the sales tax payable as the expense. If you use the Pay Sales Tax function properly it zeros out the sales tax liability – and then you can check to see if the amount still open makes sense.

    Always print out your sales tax liability report and save it with your tax filing – if something changes in QuickBooks later, you have the original report to compare to.

    Hope this helps!

  71. Virginia says:

    My problem is that sales tax is not calculating correctly. I have non-taxable items at the top of the invoice with a subtotal. Then I have taxable items, with a sales discount, and another subtotal at the end of this section on the invoice. But the sales tax is not calculating on the net of taxable item less the discount amount. When I delete the non-taxable items, leaving in the taxable with the discount, the sales tax calculates correctly. When I put the non-taxable back in, it’s incorrect. How do I fix this?

    • Virginia, I’m sorry, but without seeing the actual invoice and how you have it set up it is difficult to say much. It could be the setup of the discount item, but that isn’t clear from your description.

  72. Tymeless says:

    I wish intuit would add the feature “use tax” to the program. It would work just as sales tax does with tax agencies and tax rates being created only instead of being available on invoices, sales receipts, and proposals, these would be available on purchase orders, bills, and checks to record a use tax that is due on purchases made and therefore a liability to the appropriate agency would be created. It would make life easier for contractors that work in various tax localities.

  73. bev says:

    Hi Charlie,
    I changed a name in the vendor list but it still comes up in the tax detailed report that I filed with the gov’t as the old name. Do you know how to get the vendor list name updated on the tax forms. Thanks, Bev

    • Bev, the sales tax reports use the “Vendor Name” field (not the “company name” field in the vendor record). In my sample files here if I change the vendor name field, the change shows up in the sales tax reports immediately.

  74. David says:

    Hello Charlie,
    I really appreciated your article. The problem I am having is that some of my tax rates change on a quarterly basis. When I change the tax rate, Quickbooks changes the tax amounts on all previous invoices. How can I make my changes, but keep all invoices correct?

  75. David Huff says:

    Charlie:

    Your responses have been very helpful. We are a distributor, so purchasing all of our items for re-sale and, therefore, we are not paying sales tax with the purchase. When we sell, some of our customers are re-sellers (non-taxable), but most are end-users (taxable). We are implementing QuickBooks Enterprise currently. How do we set it up where we are not booking sales tax on our purchases, then charging sales tax where appropriate? Thank you for any help!

    • David, on the purchasing side there isn’t anything you have to do. You just enter the price you pay for the item.

      On the selling side, you mark the items as taxable, but control taxation by the setting of the customer. If the customer isn’t taxable, the item won’t be taxed. If the customer is a taxable customer and the item is taxable, then sales tax is calculated at the rate that you assign to them.

      • David Huff says:

        Thank you for your quick and definitive response. Sure makes it easy. We are in the midst of our QuickBooks implementation, so I will reach out to you to help us, if we need some help.

  76. Laura Padgett says:

    On invoices in the bottom “memo” field we have a transaction ID entered. When I drill down on a sales tax report the memo column is pulling the item description. I need to have it populate with the bottom memo info. I have tried everything to make this happen. Any thoughts?

    • Laura, that is the way it works. They are not being careful with their terminology on fields (this kind of thing happens in several places. Have you tried putting your info in a “custom field” instead? I haven’t looked at that particular report to see if it will pull the custom field info or not – some reports do, some don’t.

  77. jami says:

    Is there a way to upload all the tax entities from the states webfile into quickbook or do you have to enter all of them seperately when setting up Quickbooks?

    • Jami, do you mean the sales tax items to get the tax rates? I’m not aware that any states have a QB compatible listing. Sometimes you can get it in an Excel file, but you would have to reformat that and use an import tool like Transaction Pro Importer. I’ve seen some discussions where people claim to have a file already formatted, but I don’t have a specific reference for you.

      If your sales volume warrants, you might look at the Avalara sales tax plugin for QuickBooks, which resolves that issue for you.

  78. Jami says:

    Ok, I know how to enter the sales tax items now and no…. downloading them is not an option. But, one of the 1rst ones I entered I need to edit. I have looked all over, how do I edit them? Is that even possible?

  79. Sandra Campbell says:

    Does this article apply to QBs 2013 as well?

  80. Brian Campbell says:

    I pay sales tax twice a year for my small business, yet Quickbooks has no option for that. Is there a way to get it to do that or should I just record it as an annual payment, which will not record my mid-year payment in my check register?

    • Brian, QuickBooks handles that very well. When you print your sales tax liability and sales tax revenue reports, you can specify the period to be the half of the year you are working with. When you click “pay sales tax” (and you should ALWAYS use this feature to pay your sales tax) there is a box “show sales tax due through…”, so you enter the same closing date and pay that amount. So you can pay the first half of the year, and at the end of the year pay the second half, no problem. As long as you use the “pay sales tax” feature to pay that tax, don’t just cut a normal check.

      • Brian Campbell says:

        Thank you for your response. I’ve done exactly what you described in 2011 & 2012. I get both reports easily enough. I use the “pay sales tax” function; however, QB 2011 does not record a 1st half payment in my check register since I’ve got the “pay annually” option selected (there is no semi-annual option built in). When I go to pay the 2nd half, the “pay sales tax” dialog box has no record of the 1st half having been paid, it shows the full annual amount due. It does record the full annual amount when I pay the 2nd half, but there is no QB record of the actual 1st half payment I made. Just one more bug in this bug-laden application.

        • Brian, are you using the US version of QuickBooks 2011? Is this Pro, Premier or Enterprise?

        • Brian, I don’t know what to say – when I look at the sales tax preferences in Pro 2011 I see options for monthly, quarterly and annually. This is with the current release, R12. The only difference is that I’m using the Accountant edition toggled into Pro compatibility mode – it should show me the same that you have.

          • Brian Campbell says:

            One would think that Intuit by now would have added a semi-annual option for those states like Ohio that allow it. Then again, if they’re not even smart enough by the 2011 release to have their log-in window open “activated” & on top, I’m not holding my breath that they’re ever going to fix all the other bugs. If I ever come across a different business accounting application, I’m switching. I’ve sorry for venting…I know you’re not responsible for Intuit’s programmers, & I truly appreciate you trying to help solve this issue.

  81. Anne Bowker says:

    The sales tax reports all pull from invoice dates and not payment dates. We invoice a customer in January for 45,000. He made two payments, one for 10,000 and one for 11,000. Yet Quickbooks shows the sales tax due for January on the 45,000. Anyway around this except to pull a customer transaction report and narrow it to just the payments received for January? That will make the sales tax reports always wrong.

    • Anne, have you tried customizing the sales tax reports to be on the “cash” basis instead of “accrual”? They generally default to accrual. Also check with your tax agency to be sure that they will let you use cash basis for sales tax reconciliation.

      • Anne Bowker says:

        Yes, it’s set to cash basis, both for the company and for the sales tax reports. The tax agency allows cash basis. I have pulled the tax reports and the sales by customer reports, they all show it based on invoicing, not on date payment was received.

        • Anne Bowker says:

          The difference between what Quickbooks says I owe and what I actually owe is 3800.00. Quite a difference. I’m thinking I’m going to have to redo about 7 years of sales taxes.

        • Anne, in my 2013 R5 installation, if I have an invoice for $250 dated February and a payment for that invoice dated March, my Accrual basis “sales tax revenue summary” report shows the item for February, my Cash basis version of the same report shows the item for March. This is a situation where the invoice was paid in full. I didn’t get into all the variations that can occur with partial payments, etc.

          So in my test case, it seems to be working the way that I would expect…

  82. Vignesh says:

    I’m having trouble with the Sales Tax Option when downloading transactions from my shopping cart into a new QuickBooks file we created.

    The problem is when the orders are imported into QB, a new Vendor “Sales Tax Agency” is created instead of using the existing one. All other fields (Sales Tax Item Name, Sales Tax Account) are correct, except Sales Tax Agency, which is not linking properly. This throws off the Sales Tax Liability Report in QB.

    Any suggestions?

    • Vignesh, I would talk to the company that creates the shopping cart that is pushing out the data to QB. Or, if you are using a connecting program, talk to them. I can’t say much without knowing how you are doing the integration and what data they are sending over. It sounds like this is a problem on the source side, not on QB’s side.

      • Vignesh says:

        Charlie,
        Thanks for your reply. Well, my shopping cart allows me to export orders to an IIF file, which I import it into QuickBooks.

        I will check with them.

        • That may be a part of the problem. IIF is a lousy way for products to use to import data. I never recommend anything that uses IIF, there is no error checking and it is easy to create bad data with it.

  83. Tim says:

    We use quickbooks for its general ledger purposes. It will not work for our invoicing so we don’t bother putting in any customer info or any invoice info. But I need to record sales tax payments. Is there a way to put what we owe (we track it using our invoicing software) in one lump sum so that we can then record the payment and it gets deducted from our total income? Currently we are reporting it under the tax line “Miscellaneous taxes” which is not proper. From what I understand, it shouldn’t even show up in the gross sales amount at all.

    • Tim, so how are you entering your sales figures? I would still consider using a transaction window – create one customer for “sales”, one service item for “sales”, and a sales tax item. Enter the info in a sales receipt as a summary. Then the sales tax system is going to work for you.

  84. imarcw says:

    How do you code an item that is subject to additional tax because of its type, such as lodging? All sales take place in one location, so each customer can be set to pay the same state tax, but lodging-related items are subject to both the state tax and an additional lodging tax. It looks like items are only able to be specified as taxable or not — there is a tax code, but not a tax item. Can I set up an additional sales tax code to attach to these items to have them taxed at a different rate?

    • There are several ways, it depends on how you want to treat the taxes and see them show on reports. It is hard to go into detail in blog comments, you should talk to a qualified QuickBooks advisor who can sit down with you to go through the details. In summary, one way is to have the lodging tax set up as an “other charge” item and add that after each line that has that tax. This doesn’t put the numbers into the sales tax reports – which might be what you want, or might not be. Another approach is to have separate sales tax items for these kinds of situations, and insert them in the detail of the order, rather than using the tax at the bottom of the order. That has different advantages and disadvantages. But you should talk to an advisor who can look at your specific situation.

  85. Hi: Nice article and series of articles. My question is if there is a way to show the amount of tax due for each entity on the balance sheet. That is to ask:
    Sales Tax Payable = Account 2200
    Florida State Tax 6% = Account 2210,
    Sarasota County Tax 1% = Account 2220,
    Manatee County Tax .5% = Account 2230,
    and so on.
    all sub accounts of 2200.

    But the balance sheet shows only Sales Tax Payable 2200 with any dollar figures, so the payment/check has to be db Sales Tax Payble, cr cash in bank, and does not show the amount for each entity?

  86. Teresa says:

    How do I get non-taxable invoices to not hit the sales tax payable account? Its so frustrating seeing line after line of zeros. Most of our customers are non-taxable. Also, on the sales tax payable report some of the non-taxable invoices show up on a line called TX Sales Tax, in the total sales and in the non-taxable sales sections. But then there is a whole different line below that called No Tax Vendor, non-taxable. I can’t figure out how QB differenciates between invoices to determine which total to put them in. Suggestions?

  87. Jennifer Mellard says:

    I’ve set up my sales tax group as Sales Tax Payable for my customer invoices. How should I label the accounts for paying those taxes to each jurisdiction (state & local, I currently have each listed as an expense)? Thanks.

    • Jennifer, review this article for the details. Your “sales tax group” item won’t point to any account. The detail sales tax items automatically send info to the proper Payables account. You track the different jurisdictions, if necessary, by creating a sales tax ITEM for each jurisdiction (and combining them in sales tax groups).

  88. Mary Koetting says:

    I’ve entered the new sales tax in the item list and made the old rate inactive. However, when creating an estimate, the old rate comes up, and the new one is not in the drop-down list. This only happens with estimates, not invoices. Any suggestions? Thanks.

  89. Luann says:

    The new 1099k forms report total credit card transactions including sales tax to the IRS. How do I set up sales tax collected as income.

  90. Mike says:

    Charlie,

    We’ve changed over all of our customers to the new (old) British Columbia sales tax. We are running into a problem with the sales tax on specific items. For example, freight, which is not subject to Provincial Sales Tax, still shows up at 12%, despite our having changed the “freight” item to GST only at 5%. It seems that the customer tax code is overriding the item tax code. Is there a way to remedy this? Can a customer have one tax code and an item another without manually altering the freight tax code on every transaction?

    Thanks

  91. Elizabeth says:

    I need to create an invoice totaling $63 that is taxable. So when I back out the sales tax, due to rounding, it totals either $62.99 or $63.01. Do you know how to adjust this? Thank you!

  92. scg says:

    Charlie,
    I’m preparing the sales tax return and got all the figures from the quickbooks sales tax report. However, the Sales Tax Return says I owe $13654.00 but in the sales tax report it shows Sales Tax Payable as of 6/30/13 shows $15,330.00. A difference of $1676.00.

    We overpaid the sales tax prepayment on the 2012 4th Q by $1676.00 and we received the refund on April 4, 2013 same amount. I posted the refund to sales tax liability account, as other deposit. So, I’m not sure if I should be posting the refund to sales tax liab account or other income. Could the refund be creating the difference on the Sales Tax Report?

    • I would have to see your file to be able to give you a definitive answer, but in a general sense you never want to make adjustments directly to Sales Tax Liability – you always want to do something that works through the “Sales Tax” menu options under your Vendor menu. Adjustments to the account directly don’t get picked up by the reports…

  93. Matt says:

    Hi Charlie

    Thanks for your great article and explanation. I understand how to make a group of tax items to handle each nexus in say WA for state sales and local sales and that is great.

    What I am trying to do is also add our company tax liability that we do not pass on to the client (eg Washington State B&O tax) but tie it to the invoice.

    So if we charge the client $100 on a line item on an Invoice and their Group Tax adds 9% and charges them $109, how do i also have $0.41 hit a Tax Liability Account that we are responsible to pay so it hits our P&L and is ready to pay at the end of the quarter. Can we have an item that we are responsible for and is part of the tax group for the line item but does not bill the client or is there another smooth workaround?

    Thanks a bunch!
    Matt

    • I’ll have to think about that one, Matt. My first thought is that you aren’t going to be able to do that in the invoice itself, since any value you add is going to either increase or decrease the total invoice amount. I think you may have to just run a period-end report and make an adjustment to the account, rather than having it built in to the invoice automatically. But that is just my first thought on this…

  94. Christie W. says:

    I apologize if this was already addressed earlier but I don’t have time to read over 200 entries.

    We have Quickbooks online for our small business. We just switched to the online version this year…thinking it would make life easier. My husband spent 4 hours with customer service yesterday and they can’t help him with his problem.

    We have a pool servicing business. We obviously don’t charge sales tax for pool service. We only charge sales tax if we’re billing for products. We need to report to the tax reporting agencies 1) TOTAL gross sales – meaning all invoices whether they had sales tax or not 2) Of that gross amount, the amount that is taxable and then 3) the difference. The desktop version tax liability report showed that. On the online version…it does not. It only shows the total of TAXABLE amount invoiced; it does not show the total gross. For all the invoices that were for services only in which no tax was charged….it shows zero.

    My husband thought of creating a tax item that says “0%” and include that on invoices for non-taxable services only, but in another blog I read that it doesn’t work. So, he is at his wits end because he is thinking he is going to have to manually total over 700 non-taxable invoices to get the correct gross. Is that really the only solution?

    • Christie, my apologies – this article is about QuickBooks Desktop sales tax. As you have found, QuickBooks Online is very, very different. Sales tax is an area that I haven’t explored in QBO yet, so I don’t have an answer, other than to say that QBO is much more limited at this time.

  95. Tracy Morgan says:

    Thank you for posting this. Sometimes simple things in QB can be frustrating to figure out. I was just missing one of the three items on the estimate and having quite the time trying to figure out how to fix it via QB help. Thanks so much for making it simple to understand!

  96. Nicole says:

    This has been very informative — thank you! Unfortunately, I am still running into an error in which no sales tax is being calculated on my invoices. I have quadruple checked that the customer tax code is taxable, the tax item has been selected and the tax setting on the item is selected…but still the sale tax is not showing. (I am using QB for Mac 2013.) Any advice? Appreciate it and thanks again for this easy to understand overview!

  97. Sarah says:

    We own a gourmet food truck and charge an amount that is inclusive of sales tax. In other words, a sandwich sold for $10 actually sells for $9.25 and we collect $0.75 sales tax. How can we enter the $10 and the tax rate into Quickbooks and have the program make the appropriate adjustments, so that our sales are not including the sales tax.

  98. Liza says:

    Hi,

    How do I enter tax on invoices received for purchases?

    • Liza, that would be just another component to the cost of the item you are purchasing. It doesn’t fall into the “sales tax system” in QB since you aren’t reporting that to a taxing agency.

  99. Bill says:

    Hi Charlie,

    How do I properly enter tax penalties into QB2013? Currently the system reflects that I overpaid.

    • Bill, I would have to know a lot more detail. You should work with your financial advisor on this. Off the top of my head, depending on details, you may want to do a sales tax adjustment (under Vendors/Sales Tax). Don’t do a posting like a journal entry or bill or credit directly to sales tax payable.

  100. Jo says:

    Hi every one jo here. now im using pro(quickbooks) and im required to compute withholding tax for my customers so that im not charged more than required. may be to be more clear, here in Uganda people you provide service to can as well be tax agents depending on the payments they make due to the size of the entity, in other words more payments (URA) Uganda revenue authority approaches one to to hold a percentage of ones payment.

    Now in this case my payment is being held but some how my client is retaining more so i want one to help me know how i can add a subtraction/ computation of the figure that the client is going to keep. Quick-books is still challenging me on this,
    Thanks

    • Jo, I’m not sure that I can answer that, as there are a lot of different issues here. Comments in blogs are hard to use to provide detailed help. I recommend that you go to the Intuit forums at https://community.intuit.com/ and post your question there.

      • Carol Ann says:

        I live in a city that charges sales tax, so when we buy office supplies for our company, we are charged sales tax. When I go to Vendor/Bill and want to post the receipt from the office supply store, I can’t seem to find a place to add sales tax. Any help would be appreciated..

  101. Jo says:

    Actually i want help on how to include this on an invoice that im to send the client.

  102. Roo says:

    Hi Charlie , i am using enterprise solutions , and i have question regarding , In put tax, is there away we can capture the input tax( tax paid when purchasing goods 0r services ) that needs to net off with the sales tax ?

  103. Pravina says:

    Hi Charlie,

    I need to manually enter (daily summary)of
    sales tax amount on a sales receipt. How do I accomplish that.
    Case – For NY state, there are more than 25 counties with various rates but payable to NY state. I don’t need customer/invoice details as I am posting GL entries in this file. I am trying to separate Sales tax collected from the gross amount daily so I can track it in Sales tax payable account.

    Thank you.

    • Pravina, I’m not sure that I follow all that you are asking entirely. You say you are entering a sales receipt, but then you imply that you are doing other adjustments, so I’m not clear as to what you are trying to accomplish.

      If you don’t use a sales receipt transaction, or an invoice transaction, for entering sales with sales tax, you can always adjust the amount of sales tax due by using the option under Vendors/Sales Tax/Adjust Sales Tax Due

  104. Seth Johnson says:

    Charlie,
    Sorry if this has been asked. We take credit card downpayments for jobs to order materials. The job is not billed until its complete. Is there any way to take a credit card down payment without charging tax until the end of the job? Typically the job is complete 4-6 weeks after the down payment. Also, we would file the downpayment as labor, but many times the labor is far less than the actual down payment. Any ideas?

  105. Rowena says:

    Hello Charlie,

    I have recently updated my 2001 version quickbook to a 2010 version. Now whenever I enter a taxed invoice in the amout colume in the 2001 version,on entering the actual purchase price(ie without the tax) the system would calculate the tax and store it for further reference. I have noticed that with the 2010 it is not doing same. What adjustment I would to make?

    • I can’t speak about how the 2001 version worked, and I’m not sure I quite follow what you are saying. As this article describes, with current versions you have to turn on the sales tax preference, create a sales tax item, assign that item to be the tax item for the invoice, specify that the customer and the item are taxable. Then QuickBooks will calculate the sales tax for you.

  106. rob says:

    In preferences, sales tax is turned off. Still, when creating an estimate, I get the message-You must assign a Sales Tax code to this line item. If the item is non taxable,assign a non taxable code. To speed up data entry, assign tax codes to items.

    • You don’t mention what version/year/edition of QuickBooks you are using. Assuming it is a relatively current version of the Windows desktop version, try turning the sales tax preference on, exiting QuickBooks, restarting QuickBooks, then turning the sales tax preference back off. That often fixes this particular issue, but not always.

  107. Elise Perez says:

    Hi Charlie,

    I’m using QB 2013, and I’ve created an item for rental income as I need to be able to Invoice/receipt customers for rent payments. However, I do not want rent income showing up when I go to my sales tax liability report. When I go to create an item, the tax code option is mandatory, so it’s forcing me to choose tax/non-taxable, thus when I save a receipt it automatically throws the income into my sales tax income report. I do need to keep my sales tax preference on, as we have an actual business, and I do collect sales tax also. I shouldn’t have to choose a tax category for rent because rent should not be reported under sales liability. Please help!

    • If you charge sales tax in some cases, you have to leave the preference on (as you found). There are several ways that you can deal with this. Perhaps the simplest is to create a “sales tax item” that you call something like “Rent no sales tax” or something similar. When you create that item you can either leave the “Tax Agency” as blank, or you can create a dummy tax agency vendor. Do NOT use the same tax agency as you would for your normal taxable sales.

      Use this tax rate in the invoices for rent.

      This will put these transactions into a different portion of your sales tax reports. They will be separated into their own section, by the “tax agency”. That makes it simple for your reporting.

      There are other ways, and other things you can do, but that should cover the basics. If you don’t want these to even show on the report itself (there isn’t a reason why you shouldn’t, though) you can set up a “Sales Tax Code” for “Rnt”, and use that for your rent items. Then in your sales tax reports you can set a filter to exclude the “Rnt” transactions, and the report won’t show those. But that is a bit more work to use.

      • Elise says:

        Hi Charlie,

        Thank You for the reply. I have tried both of your options. With both methods, the items still show up on my sales tax liability report. When I create a receipt using the rent item, and choose the ‘rent no sales tax’ item, I still have to choose a sales tax code, whether it be the new Rent Tax Code or by just using generic ‘nontaxable’, but either way, it still shows up on the report. So, I have created both the sales tax item and the sales tax code, and will use both on my receipts. I was afraid of the items showing up on my liability report because the rental amounts are added to total sales. But, now I see that the amounts are broken down, so it gives me a total without the rent (which is the one with the tax agency i choose), and one without the rent used (the rent sales tax item). Thanks a bunch!

        • Elise, my apologies for not making it clear – these values will (as you found) show on the report, you can’t get away from that. However, they will be segregated so that you can clearly see which values to report as sales tax and which to not.

      • Elise says:

        I did want to mention that I did receive a message “QB has detected transactions that have a sales tax item with a zero rate even though the items are marked taxable”
        Solution: quickzoom on the taxable sales total on the sales tax liability report for each sales tax item with a zero rate. Edit each of the transactions with a sales tax item with a zero percent rate by changing the customer tax code on the sales form to use a non-taxable sales code.

        Does this message have any importance? I know that there’s a 0% rate because i that’s for my ‘sales tax item’ called Rent.

        • That is an error check just so that you can be sure that you don’t miss something. it is warning you that there is something that MIGHT be wrong in some situations. In this case you can ignore it.

  108. Elise Perez says:

    I’m back. So, I chose ‘No’ to in Sales Tax – Company Preferences – to the question of ‘Do you collect sales tax’. Sure enough, this solved the problem, however, then I was unable to charge sales tax when necessary, and all of the sales tax liability options disappeared. So, it didn’t solve the problem. I’m thinking the only option is to choose no to sales tax when you have to create a rent receipt, save, then once finished, go back to clicking yes to sales tax. This actually worked because I tried it, but there has to be an easier, less tedious way!

  109. toni says:

    Hi,

    I cannot find this answer no matter how I google for it. Perhaps I am approaching it wrong.

    I sell on Amazon, and do not import actual customer orders into Quickbooks Premier 2013. I calculate sales tax outside of Quickbooks. I wanted to enter sales tax I paid last year for record keeping purposes, but I do not know how to do this properly since I’m told it’s not an expense. Any help would be appreciated.

    • Toni, that would depend on how you are entering your sales/invoices. If you sell something for $25 with $2 in sales tax, are you posting $27 to sales, $25 to sales and $2 to taxes payable, or just posting the $25 while ignoring the sales tax?

  110. Karen says:

    Self assessed tax. As a contractor in Canada I need to self assess pst for most of my customers however sometimes the customer comes in and picks up the product so I need to charge pst on sale of product. I have already paid a portion of the pst through self assessment but I need to submit the difference from sale of goods pst minus the cog pst. Do you have any ideas how to do this within the application.

  111. Courtney says:

    Hi, I’m trying to find the 3 digit sales tax code for my area to set up Quickbooks but I’m unsure where to find it. Quickbooks requires you to have the 3 digit code to set up sales tax codes, you can’t move forward with sales tax until you put that code in. I have googled it trying to find it but I was not successful, do you know where or how I can find the 3 digit code for sales tax in my area? Your help would be greatly appreciated!!!! Thanks!!!

    • Courtney, there are a couple of things you need in QuickBooks desktop products for sales tax. One of them is the “Sales Tax Code” – a 1 to 3 character code. QB comes with two already built in – “Tax” and “Non”. You find these in the “sales tax code list” that is under the “Lists” menu. You wouldn’t normally have one for “your area”. Most businesses can get by with just “Tax” and “Non”, although there are things you can do with those codes to get more info.

      Your local sales tax rate would be something you would create as a “sales tax item” or group, as described in the article. That is where you enter the tax rate for your locale.

  112. Matt Stafford says:

    How would I go about adjusting the Balance sheet sales tax amount to the amount that is correct within the “Pay Sales Tax” screen. I have about a $10000 difference between what the Balance Sheet says and what I truly owe. Every time I try GJE I have to input the Vendor name and it resets the Sales Tax Module.

    • Matt, you never want to use a General Journal Entry to adjust Sales Tax Payable. Use the “Adjust sales tax due” function, in the Vendors/Sales Tax menu.

      • Matt Stafford says:

        Someone previous to me must have done something. Sales tax reports look fine, but my Balance Sheet amount is about $10,000 off. My sales tax due amount does not match balance sheet amount due.

        • Look for GJE’s to the sales tax account. Or, work with a ProAdvisor or Sleeter Certified Consultant (click on the “find a consultant” graphic at the top of the page) – there is a tool in the QuickBooks Accountant edition that can be used to help pin these kinds of things down easily.

  113. Kristi says:

    Charlie I’m new to all this. I know how to set up my taxes and all that but where I’m located our city tax is 4.35 but we buy parts in a different city and our customers are from all over so what tax do I charge them if we perform the work all in one location. For instance we pay for parts and get charged 4.60 city tax on some parts do we charge the customer the same on their invoice. also do we charge the customer tax from where they are located or the tax where I am located?

    • Kristi, that kind of thing is something you should talk about with your accounting advisor, and your local sales tax agency. Laws on sales tax vary from State to State. In a general sense, at least where I’m located, I would have a resale certificate so that items I purchase for resale wouldn’t be taxed. As far as what you charge the customer, that depends on many factors that are complicated. Do you have a “presence” (called “nexus”) in the location of the customer? What kind of item is being sold? Many factors. For example, where I’m located, if I sell a computer to someone out of my storefront I charge them local taxes, but if I’m selling them a car then I charge a rate based on where they live. It is very confusing.

  114. Kristi says:

    Another question what is you blog for reporting?

  115. Kristi says:

    THANKS FOR YOUR RESPONSE IT IS VERY CONFUSING. ME AND MY HUSBAND STARTED A BUSINESS WORKING ON CARGO TANKS. WE HAVE TO BUY THE PARTS TO WORK ON THE TRUCKS WE HAVE A RESALE CERTIFICATE AS WELL HERE BUT WE HAVE TO HAVE 6 MONTHS OF RESALE FIRST BEFORE WE CAN GET IT. WE BUY THE PARTS WITH DISCOUNT AND CREDIT AND THEN WE CHARGE IT OUT TO THE CUSTOMER. SO JUST WASN’T SURE ON THE TAX SITUATION BUT I’M SURE I WILL EVENTUALLY FIGURE IT ALL OUT. AND ON THE OTHER QUESTION IN THE DESCRIPTION ABOVE IT SAYS YOU WILL HAVE ANOTHER BLOG ABOUT REPORTING TAXES. CAUSE I HAVE TO REPORT OUR TAXES FOR CITY AND STATE AND THAT’S HOW I WILL BE ABLE TO GET A RESALE CERTIFICATE.

  116. Megan says:

    We have two additional taxes on telephone services that we must charge our customers. SO we have to charge a Sales Tax, a USF fee and a TRS fee. Ideally we would like and need these taxes to show up seperately, or show the tax detail on the invoice. Do you know how I would do this? We currently use QBO online Plus. Thank you for your help.

    • How about just adding those fees as regular charge items? You don’t get some of the benefits of the sales tax reporting features, but you can add the charges. It depends on how you want to manage those charges.

      • Megan says:

        My thought was that the rates change frequently and if I had them listed as a tax I would just have to change it one place correct? That is why I was hoping to be able to have it listed as a tax.

        • Changing the rate of a tax item is just as easy as changing the rate/price of a service item. They are all items in the item list. In fact, sometimes changing a rate in a sales tax item causes some extra hassles because of how they are listed in the sales tax reports.

          The benefit of the sales tax item is how they are incorporated in sales tax reports, but you might not need that depending on what your requirements are for these taxes.

          • Megan says:

            Yes…I am sorry I say rate…but it is a percentage. The USF rate is a percentage of our voice service rate. SO it works like a tax. When you say service item, I assume you mean a line item of the invoice…am I able to create a service item that calculates on another service item? Do you know if there are any other versions of QB that enables you to list tax details on invoices?

          • You can create a service item (or other charge item, if you prefer) and enter the rate as a percentage. Just enter “10%” in the rate field.

            Then you add your regular item, like a “widget” if that is what you are selling, and underneath that you put this service item with a percentage rate, and it will apply that percentage to the item just above it.

            If you want that percentage to apply to several items, you enter the several items, add a “subtotal” item under that, and enter the percentage item underneath the subtotal.

  117. Dee Ward says:

    Hi, We own a Heating, air conditioning, and deliver heating fuel oil in New Jersey. Our state requires that we charge gross receipts tax on the fuel oil to commercial accounts. This tax is not a percentage but is flat amount of 4 cents per gallon for businesses or 2 cents per gallon for properties that are partially business and residential (example: store with residential apartments).

    My question is: can I set-up QB to charge this flat fee tax per gallon? I only see percentage taxes for items.

    Thanks so much for any help you can suggest.

    Dee

    • Dee, you can manually enter the amount in the invoice – select the tax item and then change the amount to the fee you want.

      If you don’t want that, you can just create a service or other-charge item for the rate that you want and add that. You don’t have to use a “sales tax item”. Then, of course, you don’t get the benefit of the sales tax reports, but in many cases that isn’t an issue. It does depend on what your reporting requirements are.

      • Dee Ward says:

        Thanks so much. One more question – Presently we have QB Pro Plus 2013 for two users (which is approximately $500/year). We were considering switching to QB Online because I travel quite a bit and would like to easily access our accounts. The other user is always in the office. When I called QB to compare the Pro Plus to QB Online, Customer Service suggested “QB Hosting”. Would you recommend this? She explained the benefits were: wouldn’t have to change our present QB which has more benefits and features then QB Online. This QB hosting is quite expensive – we would still need to pay the $500/year for the Pro Plus + $900/year for the hosting = $1,400/year. What would you suggest?

        • QuickBooks Online is quite a different product than QuickBooks Pro on the desktop. See this article for a comparison: http://www.sleeter.com/blog/2013/01/comparing-quickbooks-desktop-with-quickbooks-online/

          In your situation there are a couple of options if you want to stay with the desktop software. What works best depends on how you use QuickBooks and what work you would be doing while traveling.

          The simplest/cheapest is to have QuickBooks installed on your desktop computer in the office, leave it on while you are traveling, and use a remote access program like LogMeIn or TeamViewer (there are many on the market) to access that desktop over the Internet from a laptop or a tablet computer (I do this using my iPad when on the road). Low cost – you only need the remote access program, which can be very cheap. The main issues here are security (you are leaving your office computer on all the time, while you are gone, so someone can use it), availability (you have to remember to leave that computer on when you travel!) and speed (often access like this is slow, depending on many issues). One nice thing about this is that it is very simple to test, you often can get a trial version of the remote access product to try, and there are no other costs.

          “Hosting” from an authorized QuickBooks hosting company like Cloud 9 Realtime or Right Networks (there are others) can work very well. There are advantages and disadvantages. Usually you will find that the remote user will have faster access than a “remote login” situation like I describe above (but not always). You don’t have to worry about leaving your office computer on all the time. However, the cost is higher. The person working out of your home office will now have to work over the Internet. You may have restrictions on what add-on software you can use.

          One thing that I would point out is that you don’t need to use Q Pro Plus if you don’t need the “Plus” benefits. A purchased copy of Pro can also work, if that fits your situation. That would reduce your annual cost a bit, if you don’t update every year.

          I recommend that you talk to a knowledgeable accounting professional who can evaluate your situation and make the best recommendation for your needs.

  118. Robert Tibbits says:

    i have purchased a 2013 US version of quickbooks and need to account for VAT. How do i convert a sales tax module to a VAT regime where there are three vat rates.

  119. sean says:

    Hi, Charlie Russell,

    When I setup the company’s tax items, I forgot to link with G/L accounts. Now, after entering the bills we received, I can see the GST/QST(5% and 9.975%)but when I run the report, all tax were automatically put into expense accounts instead of separating into net expense and GST/QST. How can I link sales tax item with accounts?

    Thanks

    Sean

    • I can’t help you with the Canadian version in this case, as I only have the US version. In the US version you don’t specify an account in a sales tax item, as it always posts to Sales Tax payable. You will need to find a Canadian expert to help with this.

  120. Lauren says:

    New York has different filing periods than other states. Most are Jan-March and so on but NY is Dec-Feb and so on. So when I go in to pay my quarterly taxes for NY it always show the wrong totals…to pay these taxes I have been adjusting them every quarter to reflect what we owe. is there a way to set it up on the backend so that it calculates the right months for this particular state?

  121. jillian says:

    I entered a sales tax adjustment and want to change it and can’t figure out how. It keeps coming up when i want to pay sales tax
    Using QB for mac 2014.

    • Jillian, I don’t have a Mac version to test, but in the Windows version a “sales tax adjustment” is essentially a journal entry. You can go to the list of general journal entries and find the adjustment there, to make changes. Or, find “sales tax payable” in the chart of account to get a list of entries against that account, and edit the transaction.

  122. Stephanie says:

    Hi there, we are new to using Quickbooks Enterprise (QBE) and need to set up two scenarios for collecting tax from our customers. The first being a standard percentage for parts and materials sold to our customers, which we have set up, the tax liability account seems to be reporting properly. The second type would be sales tax factoring for certain customers that we need to collect tax from but not show it as a line item on their invoice Example – we have a lot ‘tribal’ sales – they all claim to be tax exempt but in reality the sales do not qualify for exemption. Rather than make a dispute out of it, it would be easier to use a factored sales tax method. Do you have any suggestions on how to set up in QBE? Thank you for your time.

    • So if you have a sale for $100 and there should be tax of $10, you are charging them just the $100? How would you be accounting for the $10 internally? Who pays that?

      If you don’t mind the invoice being for $110, and you just journal off that $10 somehow, you can create an invoice template that has the sales tax box at the bottom, but use the layout designer to change the font to white. That (on most printers/forms) makes it disappear. Hide the sales tax and total, just show the subtotal (which is before tax). But that might not be what you want.

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