Add a tax category to products and services

Learn how to add a tax category to your products and services in QuickBooks Online.

Instead of manually calculating tax, let QuickBooks do the work for you. Add a tax category to your products and services to accurately calculate how much to tax your customers. Here’s how.

Step 1: Set up your tax

The rules on how to tax a product or service can change depending on what you sell and where you sell it. QuickBooks keeps track of those tax rules, so you don’t have to.

Here’s how to set up your tax so QuickBooks can determine the rules that apply to you.

Step 2: Find out what products or services need a tax category

The taxability of a product or service can vary from province to province. Some specific products and services have special or reduced rates and fees.

Important: If you’re still not sure which tax category to assign, ask your accountant for help. They have the best insights into what tax categories your items need. If you don’t have an accountant, we can help find an Accountant (for your region) near you.

Step 3: Assign a tax category to a product or service

When you’re ready, here’s how to assign your items to different tax categories.

1. Go to All apps , select Sales & Get Paid, then select Products & services (Take me there).
2. Look for the item you want to assign a tax category to, then select Edit.
   Note: If you want to assign a tax category to a new product or service, here's how to add a new inventory item.
3. Select the Sales tax ▼ dropdown, then find and select the specific tax that fits your item. 
4. Complete your item’s info:
   • For an inventory item, complete these steps.
   • For a non-inventory or service item, follow these steps.
5. Save your item.

Notes:

• If you see the error “Error when saving or confirming tax category - "item name" couldn't be categorised." while saving, check your default sales item setup.
• This error occurs when the default sales item maps to an incorrect income account.
• For inventory products, assign an income account with the following:
  • Account type: Income
  • Detail type: Sales of Product Income