How to resolve common sales tax issues

Learn how to troubleshoot issues or unexpected results you may encounter while managing your sales tax in QuickBooks Desktop.

In this article, you'll learn how to troubleshoot the following issues:

• Invoice prints “T” even though the sales tax feature is turned off
• Warning: You must specify a supplier name for the sales tax account
• Negative sales tax payable on the cash basis Balance Sheet report
• Inactive Sales Tax Items affect a Sales Tax Group
• Error when trying to create a Credit Memo
• Warning: this item is used in a customer data. It cannot be deleted
• Sales tax line item does not appear when printing invoices

Invoice prints “T” even though the sales tax feature is turned off

• Details: Invoice prints “T” next to taxable amount even though the sales tax feature is turned off
• Possible reason: Damaged invoice template
• Quick Tip: You need to recreate your invoice template.
• Recommended solution: Intuit recommends more than one solution for this problem. The first solution may solve your problem, or you may need to try all of them to resolve the issue. For best results, perform the solutions in the order shown.

Solution 1: Create a new template

1. Go to Lists and select Templates.
2. In the Templates window, select the Templates ▼ dropdown at the bottom, then select New.
3. In the Select Template Type window, select the template type, then select OK. 
4. Assign a template name and select OK to save your customization. Tip: Select Manage Templates, then select OK to assign a template name.

Solution 2: Duplicate the template

1. Go to Lists and select Templates.
2. In the Templates window, select to highlight the template you use for the invoice.
3. Select the Templates ▼ dropdown at the bottom, then select Duplicate.
4. In the Select Template Type window, select Invoice, then select OK.
5. Open an invoice and use the duplicate template.

Solution 3: Default to the copy of the template

1. Go to Lists and select Templates.
2. In the Templates window, double select the Invoice template.
3. In the Basic Customization window, select Additional Customization.
4. Select Default, then select OK on the dialogue box that appears.
5. Select OK.

Sales Tax Payable is incorrect after using the Write Cheques window to pay sales tax

• Quick Tip: Do not use Write Cheques when recording a payment for sales tax.
• Recommended solution: If you are using QuickBooks Accountant or Enterprise Accountant, use Client Data Review. For all other QuickBooks editions, follow these steps:

1. Back up the QuickBooks company file.
2. Find the incorrect sales tax payments by going to the Bank Register that you used to make the payments.
3. Reenter your sales tax payments.
4. Remove the original payment transactions from other areas in QuickBooks.
   1. Go to Lists and select Chart of Accounts.
   2. Double select the bank account you used when you re-enter the payment.
   3. Scroll to the date of the sales tax payment to change.
      Note: Since the date on both the original and the re-entered payment is the same, you should see the entries near each other.
   4. If the original payment already cleared your bank account, put a check mark on the payment entry then select Record.
   5. If your sales tax payments are written to more than one tax agency, and were not originally written in sequential order, you must edit the numbers of the recreated cheques in the register to match the actual cheque numbers. You can do this by selecting the Number field, then typing the correct cheque number before you select Record.
   6. Select the original sales tax payment, then from the Edit menu, select Delete Cheque.
      Note: If you originally entered a bill and created a bill payment cheque (BILLPMT type), you need to delete the bill to keep it from appearing in the Unpaid Bills Detail report.
   7. Repeat Steps 4.c through 4.f for each sales tax payment you re-entered.
5. Verify that the problem is solved.
   1. Run a Tax Agency Detail Report through the current date and compare it against the balance of your GST/HST Payable account.
   2. Check the supplier balances for each tax agency by running the Supplier Balance Detail report.
   3. Run the Transaction List by Supplier report to ensure there are no duplicate payments.

Warning: You must specify a supplier name for the sales tax account

Quick Tip: You need to enter a supplier name in the Customer:Job column when you create a journal entry or write a cheque that uses GST/HST Payable account.

Negative sales tax payable on the cash basis Balance Sheet report

• Details: Your cash basis Balance Sheet shows a negative amount for sales tax payable indicating that the province owes you money.
• Possible reason: If you pay sales tax at the end of the month, you can pay in the month when you create the invoice (accrual basis) or the month when you are paid for the invoice (cash basis). You would likely see a negative balance for the GST/HST Payable account in the Balance Sheet report if you pay on accrual basis and run the report on cash basis.
• Quick Tip: You need to ensure that QuickBooks is set to the proper basis. Note that you may need to consult your accounting professional and the Canada Revenue Agency to ensure you are paying your sales taxes on the correct basis.

Inactive Sales Tax Items affect a Sales Tax Group

Quick Tip: When a Sales Tax Item is set to Inactive, it is not removed from the assigned Sales Tax Group. Inactive sales tax items must be removed from the Sales Tax Group so the active sales tax items can be applied properly.

1. Go to Lists and select Item List.
2. Right-click on the Sales Tax Item in question.
3. Select Delete Item.
4. Select OK.

Note: If there are invoices that were already created using the Sales Tax Group with the previous Sales Tax Item, this change will not affect how those invoices were calculated.

Error when trying to create a Credit Memo

• Details: You create a Credit Memo from an invoice or from the Customers menu and you receive a warning that says "Error."
• Possible reason: The invoice includes a sales tax item and Sales tax setting has been turned off in the company file.
• Quick Tip: To properly create the Credit Memo, you need to turn on Sales Tax, create the Credit Memo and then turn off Sales Tax again.

You can follow these steps:

1. Turn Sales Tax on in the company file:
   1. Go to Edit and select Preferences.
   2. On the left pane, select Sales Tax, then go to the Company Preferences tab.
   3. Select the Yes option from the Do you charge sales tax? radio button.
2. Create the Credit Memo.
3. Turn off sales tax in the company file by following directions in Step 1 and selecting No for Do you charge sales tax?.

Warning: this item is used in a customer data. It cannot be deleted

• Details: You are deleting a sales tax item and you get the error "Warning, this item is used in a customer data. It cannot be deleted."
• Possible reason: The sales tax item(s) you are trying to delete are assigned to at least one customer on the Additional Info tab of the Edit Customer screen.
• Quick Tip: If the sales tax item has not been used on a transaction and is not assigned to any customer, you can delete the item.

To remove the sales tax item from your customers using the Customer Contact List report:

1. Go to Reports, select List, then select Customer Contact List.
2. Select Customize Report.
3. From the list of available columns, select the Tax Item (for example, Sales Tax Code).
4. Select the Sort by ▼ dropdown, then select Sales Tax Code to sort the report and easily find the customer(s) associated with this item.
5. Select OK.
6. Double select any customer with the appropriate sales tax item in the Sales Tax Code column.
7. In the Edit Customer window, go to the Sales Tax Settings tab.
8. From the Tax Code field, remove the tax item you need to delete or select another sales tax item.
9. Repeat steps 7 to 8 for all customers associated with the sales tax item.
10. Once the item is no longer associated with any customers, you can delete it.
    1. Go to List and select Item List.
    2. Right-click the sales tax item, then select Delete Item.
    3. Select OK to confirm.

Sales tax line item does not appear when printing invoices

Quick Tip: In order for Sales Tax to print as an individual line item on an Invoice there must be a description in the description field of the Sales Tax Item in the Item List.

To add description to the sales tax item:

1. Go to Lists and select Item List.
2. Double select the Sales Tax Item that does not appear on printed invoices.
3. In the Description field, type "Sales Tax" or the description for the Sales Tax Item as you want it to appear on the Invoice when printed.
4. Select OK.