Learn how QuickBooks calculates sales tax

Take the guesswork out of collecting sales tax. If you charge sales tax for your products or services, you don't have to worry about calculating each sales tax rate yourself. QuickBooks can do all that for you. Here's how it works.

How the app calculates the correct sales tax rate on each sale

We calculate the total sales tax rate for each sale based on the following:

• Your customer's sales tax status
• Where you sell and where you ship
• What you sell

Based on your customer's sales tax status

Some customers, such as churches, schools, and non-profit organizations, may be exempt from sales tax.

You need to map your items to their proper sales tax categories, and make sure your customer's address is correct on each transaction.

Based on where you sell or where you ship

Total sales tax rates are province sales tax rates plus local (city/county/district) sales tax, based on where the sale was or an invoice or receipt’s listed "Shipping to" address.

Note: Some provinces require sellers to charge sales tax based on business location, even when you sell or ship to a different address in your province. QuickBooks knows the sales tax rules, wherever you run your business.

Based on your service or product's sales tax category

Rules for how to tax a product can change from province to province. You can assign sales tax categories to anything you sell. This lets the app know how much sales tax you need to charge based on what exactly you're selling.

Related links

• Add a sales tax category to products and services
• Use sales tax on an invoice or sales receipt in QuickBooks Online
• Add new customers in QuickBooks Online