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Top 5 Questions: Sales Tax

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Of course, you know what time it is: Top 5! It’s only one of my favorite times of the week because our customers help me create it. 

Today we’re taking on Sales tax. That necessary but sometimes confusing part of owning a business. You’ve got questions, I have answers. Here we go:

1. How do I customize the Sales Tax Report?

One of the best features of QuickBooks Online is customization, and our reports are no different. Start by clicking on the Taxes tab on the left menu and choose Reports.

Sales Tax Liability Report.png

Once there, click on the report you need and go to the Gear Icon. You’ll see all of the Tax fields available to you. Check them all or some, it’s up to you!

Gear Icon Sales Tax.png

Need more custom options? Scroll up and click on Customize to get the whole array of fields that you can add or filter for this report. Feel free to check out my other article completely dedicated to customizing: Customizing Reports in QuickBooks Online.

2. How do I make a customer tax-exempt?

Have a client or customer that’s a church, non-profit, or hospital? It’s super easy to mark them as exempt. 

Go to Invoicing>>Customers and click on the customer name. Then click on Edit on the upper right-hand corner.

Customer Tax Exempt.gif

You’ll see all their details like display name, customer, and other information. Where you want to go is the Tax info tab along the bottom, and then check the box for This customer is tax-exempt. You also have other details like Exemption details and Reasons for exemption.

Customer Info Tax.png

3. How do I see taxable and non-taxable amounts in my reports?

Great question! It’s just as important to see non-taxable amounts as it is to see taxable. These steps will be a little familiar from above, but I’ll show you all your options. After clicking on Customize, click on Change Columns.

Change Columns.png

Among all of these wonderful options, you’ll see exactly what you need.

Non TAxable and Taxable.png

4. How do I add sales tax to an invoice manually?

If your account isn’t set up for automated sales tax, here are the steps to add sales tax manually.

  1. Go to the Accounting menu and then select Chart of Accounts.
  2. Select the New button.
  3. From the Account Type drop-down menu, choose Other Current Liabilities.
  4. In the Name field, enter Sales Tax Payable.
  5. Once you're finished, select Save and close.

Account Sales Tax.png

OK still with me? Great. You have your account all set up and now you can make your Sales Tax Item.

  1. Go to the Invoicing menu and then choose Products and Services.
  2. Select New.
  3. Choose Non-Inventory or Service for Item Type.
  4. Enter Sales Tax in the Name and Description fields. You can keep the Sales price/rate field blank.
  5. In the Income Account field, choose the account you set up above.
  6. Once you're done, click on Save and close.

Account Sales Tax Product.png

Almost there! Now you just need to add that item to your invoice:

  1. Create your invoice.
  2. Add the sales tax item created in Step 2.
  3. Manually enter the amount for the Sales Tax line item, then click on Save and close.

Note: You’ll still need to write a check to pay your sales tax to your tax agency. 

5. How can I change when sales tax is applied on an invoice with a discount?

We’re already on the last question of our Top 5 and we’re talking about that little arrow in your invoices you may have missed. If you need to change when your sales tax is applied (and you’ve got automated sales tax set up), let me show you.

Switch sales tax.gif

Click on that icon to the left of your sales tax and you can switch the two fields around. This action gives users the freedom to choose if they want to apply the discount to the transaction before the sales tax or deduct the sales tax from the transaction before applying the discount.

That’s a wrap! You know I’ll be back with another Top 5 before you know it. Until then, Community, see you next time!

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