Learn how QuickBooks Online automatically calculates sales tax when you make a sale.
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 tax rate yourself. QuickBooks can do all that for you. Here's how it works.
How QuickBooks calculates the correct tax rate on each sale
QuickBooks automatically calculates the total tax rate for each sale based on the following:
- Your customer's tax-exempt status
- Where you sell and where you ship
- What you sell
Based on your customer's tax status
Not all customers need to pay sales tax, like churches, schools, and other non-profit organizations. Here's how to find out if your customer doesn't need to pay sales tax. Then, you can set up your customer as tax-exempt.
Based on where you sell or where you ship
Total sales tax rates are the sum of provinces rates plus local rates (which may include city, county, and/or district rates). You don't have to keep track of all the rates you need to charge. QuickBooks does all that based on the location of sale or the "ship to" address you add in an invoice or receipt.
Note: Some provinces require sellers to charge tax based on business location, even when you sell or ship to a different address in your province. If your business is in any of those provinces, don't worry. QuickBooks knows the tax rules, wherever you run your business.
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Do you sell out of your province? If your business doesn't have a physical presence in other provinces, you generally don't need to charge taxes for out-of-province transactions. But if you have an economic nexus in another province, this means you are a remote seller. When you sell to that province, you charge tax rates at the place where your product is going. Important: Keep in mind that each province has their own take on economic nexus. We know this can get a little complicated. If you're not sure if you have economic nexus in another province, talk to your accountant. If you don't have an accountant, we can help find one near you. |
Based on your service or product's tax category
Rules for how to tax a product can change from province to province.
You can assign tax categories to anything you sell. This lets QuickBooks know how much tax you need to charge based on what exactly you're selling.