Track sales tax on purchases from suppliers

You may be required to collect taxes for certain goods and services you offer. QuickBooks Desktop helps you keep an accurate record of these taxes so you can easily monitor and remit them to the appropriate tax collecting agency.

This article is part of a series on Sales Tax. It covers the usual sales tax workflow in QuickBooks Desktop.

• Set up sales tax
• Collect sales tax
• Review sales tax reports
• Pay sales tax

It also helps you complete other sales tax-related tasks.

• Handle cash basis sales tax
• Process sales tax adjustment
• Show multiple sales tax items on an invoice
• Refund sales tax collected from tax exempt customers
• Track sales tax on purchases from suppliers

If you encounter problems while working on your sales tax, see Resolve common sales tax issues.

You need to manually track sales tax on non-sales transactions like bills, cheques and purchase orders. QuickBooks is not designed to track sales tax automatically on non-sales transactions.

Track sales tax on purchases as an expense (not to be paid later)

1. Create an Expense account.
   1. From the Company menu, click Chart of Accounts.
   2. In the Chart of Accounts window, right click anywhere and click New.
   3. In the Choose Account Type window, select Expense then click Continue.
   4. Enter the Account Name and other details then click Save & Close.
2. When creating a transaction (like a bill) in which you will be tracking sales tax, enter the bill as usual but go to the Expenses tab instead and select the expense account created in step 1.
3. On this line, enter the amount of sales tax in the Amount column (this will need to be calculated manually).
4. Ensure that any detail in this transaction adds up to the correct total after clicking Recalculate.

Track sales tax on purchases as a liability (to be paid later)

1. Create an Other Current Liability account.
   1. From the Company menu, click Chart of Accounts.
   2. In the Chart of Accounts window, right click anywhere and click New.
   3. In the Choose Account Type window, click the Other Account Types drop-down then select Other Current Liability.
   4. Click Continue.
   5. Enter the Account Name and other details then click Save & Close.
2. When creating a transaction (like a bill) in which you will be tracking sales tax, enter the bill as usual, but go to the Expenses tab instead and select the liability account created in step 1.
3. On this line, enter the amount of sales tax in the Amount column (this will need to be calculated manually).
4. Ensure that any detail in this transaction adds up to the correct total after clicking Recalculate.
5. When it is time to pay this sales tax, you can see the liability that has been accrued by looking at the Chart of Accounts.
6. This amount can be paid with a regular cheque.