This option is rarely used, since any code recorded this way will explicitly not report to any Federal or Provincial Tax Agencies (i.e., Canada Revenue Agency, Receiver General, etc), and won't help with filing/reporting to these types of agencies.
You can add a tax in this category specific to your industry, such as tobacco, hotel, or gasoline tax. It could also be used to track sales to U.S. customers. Another use could be to set up a proper “out-of-scope” tax code to indicate that the sale/expense doesn't fall under any tax, if the company doesn't have one for any reason.
Custom tax must be in a percentage format, not a particular dollar amount.
How to add a custom sales tax rate for an existing sales tax agency
This option will allow you to manually set up a tax for one of the existing agencies (i.e., Receiver General, Canada Revenue Agency, etc). Consider the following:
This can be used for tax rate changes and other special tax rates.
It's better to add an additional tax code than to change the existing one (this way all sales tax rates for that agency would show on the same return).
From the left menu, select Taxes.
Select Sales Tax at the top. (Tip: If you use payroll in QuickBooks Online, you may need to select Sales Tax as opposed to Payroll Tax.)
Select Manage sales tax.
Locate the sales tax agency you wish to add the new rate for, and select Add custom rate.
That's it. You now know how to set up a new sales tax code.