The Sales Tax Exception report highlights transactions where sales tax wasn’t applied correctly, @Charls, such as when tax codes were incorrect or tax amounts were manually overridden.
It’s a great tool for catching mistakes before filing your sales tax return.
How to Use It Effectively:
Step 1: Open the Report
- Go to Reports > Vendors & Payables > Sales Tax Exception Report.
- This will provide you with a list of transactions flagged for potential sales tax errors.
Step 2: What to Look For
Review the report for:
- Transactions with no tax applied: Taxable items or services sold with a "Non" tax code or no tax recorded.
- Manual changes to tax amounts: Overrides causing discrepancies between QuickBooks' calculated tax and the recorded amounts.
- Incorrect tax codes: Items, customers, or vendors assigned incorrect tax codes.
Step 3: Fix the Issues
Open each flagged transaction (e.g., invoices, sales receipts, credit memos) and verify that taxes were applied correctly:
- If tax should have been applied, update the tax codes or amounts.
- Ensure non-taxable sales are accurately documented, such as for tax-exempt customers.
- Make corrections immediately to avoid issues.
Step 4: Run the Sales Tax Liability Report
After fixing exceptions:
- Navigate to Reports > Vendors & Payables > Sales Tax Liability Report.
- This report provides totals for taxable and non-taxable sales, along with the amount of tax owed for your filing period.
- Use the figures to file your sales tax return confidently.
Extra Tips:
- Review the exception report regularly to stay ahead of potential tax errors before your filing deadline.
- Double-check that customers, items, and transactions have the correct tax codes to avoid surprises.
- Keep in mind that you can’t view a prior-period exception report—the current exceptions are cleared each time you file a return. To retain records, export exceptions to Excel before filing.
This report is also useful for identifying transactions that were backdated to a prior tax-reporting period but recorded after the return for that period was filed in QuickBooks. These transactions are automatically included in the next return.
Let us know if you need additional help!
