When I input tax exempt on an invoice, later when I print a sales tax liability report the tax exempt sale shows up in the taxable amount column. How do I fix this?

Hello there, audheatcool.

Welcome to the Community. Let me help and ensure the tax-exempt will not show on the Taxable Amount column on the Sales Tax Liability Report.

To fix the issue, we’ll have to open the invoice and make sure not to tick the box for Tax. This way, the amount will not show in the report. The process should only take a couple of minutes. Allow me to walk you through the steps.

1. On the Sales Tax Liability Report, click on the amount for the tax you’re working to open the Transaction Report.
   
2. From there, tap the invoice to see the complete details.
   
3. On the Invoice page, unmark the box in the Tax column.
   
4. Press Yes to confirm the changes.

These steps will correct the information on the report in no time.

The following links outline the complete instructions on how to configure the Sales Tax Settings and set your customers not to collect taxes. From there, you’ll find information when not to collect sales tax for your items.

• Sales Tax in QuickBooks Online
• Conducting non-taxable sales

Let me know if you need further assistance while working in QBO. I’ll be right here to help and make sure this is taken care of for you. 

Thanks for your reply; however, when a customer purchases a part or material that is a taxed product, the tax box is checked by default.  Being a tax exempt status makes it where they are not charged tax on the invoice.

The issue comes later when I run a sales tax liability report. Then those items that I did not collect tax on due to the tax exempt status, show up as taxable income on the report when in actuality, they were not taxed. I then have to deduct that tax exempt amount from my report manually.  This is the bug that needs to be fixed in the Quickbooks software.  

I spoke with a QB rep and they agree that it is a bug in the software and have a team working to get it resolved.