QuickBooks HelpQuickBooksHelpIntuit

How to resolve common sales tax issues

by Intuit• Updated 5 months ago

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

  • 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. From the Lists menu, select Templates.
  2. In the Templates window, select the Templates dropdown at the bottom, then choose New.
  3. Choose the template type, then select OK.
  4. Assign a template name and save your customization.

Solution 2: Duplicate the template

  1. From the Lists menu, 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 choose Duplicate.
  4. In the Select Template Type window, choose Invoice, then select OK.
  5. Open an invoice and use the duplicate template.

Solution 3: Default to the copy of the template

  1. From the Lists menu, select Templates.
  2. In the Templates window, double select the Invoice template.
  3. In the Basic Customization window, select Additional Customization.
  4. Choose Default > 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: Always use the Pay Sales Tax window. 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. From the Lists menu, 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. The re-entered payment will be a TAXPMT type. If the original payment already cleared your bank account, put a check mark on the TAXPMT 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 clicking in the Number field, then typing the correct cheque number before you choose Record.
    6. Select the original sales tax payment (CHQ/CHQ type) 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 4.3 through 4.6 for each sales tax payment you re-entered.
  5. Verify that the problem is solved.
    1. Run a Sales Tax liability report through the current date and compare it against the balance of your Sales Tax 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 sales tax 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 state/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 Sales Tax 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 Department of Revenue/Canada Revenue Agency to ensure you are paying your sales taxes on the correct basis.

To set Sales tax basis in QuickBooks:

  1. Login to your company data file as the administrator.
  2. Switch to single user mode (File > Switch to Single-user Mode).
  3. From the Edit menu, select Preferences.
  4. In the Preferences window, select Sales Tax in the side bar, then choose Company Preferences tab.
  5. In the When do you owe sales tax? section, select the appropriate basis for your company.
  6. Select OK.


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. From the Lists menu, select Item List.
  2. Double-click the Sales Tax Group in question.
  3. Highlight the sales tax item(s) you want to remove, then select CTRL+Delete.
  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:
  1. Turn Sales Tax on in the company file:
    1. From the Edit menu, select Preferences.
    2. On the left pane, choose Sales Tax, then go to the Company Preferences tab.
    3. Choose the Yes radio button 'Do you charge sales tax?'
  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. From the Reports menu, select List > Customer Contact List.
  2. Select Customize Report.
  3. From the list of available columns, select Tax Item.
  4. Select the Sort By dropdown, then choose Tax Item to sort the report and easily find the customer(s) associated with this item.
  5. Select OK.
  6. Double-click select any customer with the appropriate sales tax item in the Tax Item column.
  7. In the Edit Customer window, go to the Sales Tax Settings tab.
  8. From the Tax Item field, remove the tax item you need to delete or choose 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. From the List menu choose Item List.
    2. Right-click select the sales tax item, then select Delete.


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. From the Lists select menu, select Item List.
  2. Double click 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.


Message: Your existing credit with [Supplier Name] is sufficient to pay your sales tax due

  • Details: Paying Sales tax in the Pay Sales Tax window and selecting a sales tax item and a discount that was entered in the Sales Tax payable register gives you the message "Your existing credit with [supplier name] is sufficient to pay your sales tax. A cheque will not be written for this supplier."
  • Possible reason/s:
    • A sales tax discount does not have the same Supplier name as the Sales Tax Item
    • When applying the discount to the amount due in the Sales Tax window, it does not print a cheque but it records the payment in the Sales Tax payable register for the full amount and does not apply the discount.

Recommended solution

  1. From the Lists menu, choose Chart of Accounts.
  2. Double-click select Sales Tax Payable account to open its register.
  3. Find the sales tax payment that was just entered, select the payment.
  4. From the Edit menu, select Delete Sales Tax Payment, then choose OK.
  5. Leave the Sales Tax Payable register open.
  6. From the Suppliers menu, choose Sales Tax, then select Pay Sales Tax.
  7. Verify that the discount does not have same supplier name as the sales tax item. Note the supplier name on the sales tax item.
  8. Select OK to close the Pay Sales Tax window.
  9. Go back to the Sales Tax Payable register.
  10. Find the discount and change the supplier name to match the supplier name associated with the sales tax item.
  11. Select Record to save the changes.
  12. From the Suppliers menu, choose Sales Tax, then select Pay Sales Tax.
  13. Put a check under the Pay column next to the correct items to select both the sales tax item and the discount item.
  14. Select OK to close the Pay Sales Tax window.

Sign in now for personalized help

See articles customized for your product and join our large community of QuickBooks users.

More like this