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Level 15

Op Ed - Auto Sales Tax in QBO

Auto sales tax in QBO is a disaster

 

As with most of what seems to be intuits corporate philosophy of "my way or the highway" - you can not turn off or opt out of auto sales tax.

 

Auto sales tax is tracked based on destination, the billing or shipping address for each sale is used. So for origin based states, you must, must leave the billing AND shipping address of the customer blank, then and only then will sales tax be calculated based on the business location. (that should make shipping interesting huh?)

 

The origin-based states are: Arizona, Illinois, Mississippi, Missouri, Ohio, Pennsylvania, Tennessee, Texas, Utah and Virginia.   California is mixed: City, county and state sales taxes are origin-based, while district sales taxes (supplementary local taxes) are destination-based.

 

Auto sales tax is accrual based reporting, regardless of what you select for sales tax reporting basis

 

Not all states require filing sales tax on an accrual basis, some are cash basis, some leave the choice to the business (TX) and some require sales tax basis to be the same as income tax basis - check with your state - do not assume.
Some I am aware of:
NY - accrual based
TX - cash or accrual, business choice
FL - accrual
CA - accrual
IL - cash
OH - accrual
MN - up to the business
AR - accrual unless the business has written permission to report on cash basis from the Commissioner.

 

There is NO provision for off site sales, Ten miles down the road is a trade fair location, it is outside the city limits, as a result I do NOT collect, nor am I required to collect, city sales tax. My sales tax rate goes from 8.25% down to 6.75% when I locate and sell outside the city limits.

 

Texas does have destination based sales tax ONLY for services that are performed in jurisdictions outside the permanent location (travel to another city in other words).

Does auto sales tax handle that? NO ONE knows.

 

Certain services in some states do collect sales tax, but at a discounted rate (TX for one). Does auto sales tax handle that? NO ONE knows

 

Washington state just through a wrench in the works. Amazon collects sales tax for sellers in WA, AND amazon pays the state the sales tax collected. You as the seller now have to report the total amazon sales and sales tax collected by amazon as a reduction in your sales tax liability.

 

Amazon and Etsy are now remitting sales tax collected to Pennsylvania too. In Pennsylvania, you will just enter the amount Amazon or other marketplaces collected on your behalf as “non-taxable income.” And in your QB file it will be - what taxable or non taxable?

 

And of course Amazon is not doing this for free, they charge a percentage of the total as a fee.

 

What is intuits auto sales tax doing about these situations?
NO ONE knows, no one will answer questions other than referring to the same ol' same ol', intuit article on auto sales tax.

 

Here is another situation, IF, if you sell on amazon, and your inventory is held in one of their fullfulment centers, then you have a sales tax nexus in that state. As a result you are required to
1. obtain a sales & use tax permit from that state
2. report all sales made though any web site, phone call, email (not just amazon) and collect sales tax
3. you are responsible for reporting and paying sales tax to each state you have a nexus in, in accordance with that states schedule.

 

Currently fullfilment centers are in the following states, with more in the works

Arizona, California, Connecticut, Delaware, Florida, Indiana, Kansas, Kentucky,
 Maryland, Nevada, New Hampshire, New Jersey, Pennsylvania, South Carolina
Tennessee, Texas, Virginia, Washington, Wisconsin

 

The trick is to find out which ones house your products, there are pay services that will do that for you, and maybe amazon will too.

 

And the biggest question of all, who is financially responsible for sales tax errors? As far as the state is concerned the business is responsible, but since auto sales tax takes it all out of your hands - intuit should be responsible, but you can bet they do not admit that.

 

What kind of records will you get from auto sales tax in preparation for a sales tax audit - NO ONE knows

 

And if the present Supreme Court case, South Dakota vs Wayfair, overturns the 1992 Supreme Court decision in Quill, not only will sales tax nexus be a thing of the past, but you will collect and remit sales tax to all 12,000+ tax jurisdictions presently existing. Three of the nine justices are on SD side, a fourth is teetering, it only takes a total of five.

What to do????

 

You can avoid, at least right now, auto sales tax, IF
if you start a new subscription, and you set reporting to cash basis
BEFORE you turn on sales tax
then you will default to the old sales tax concept where you control sales tax items, rates, etc

 

I don't know about y'all, but if I am going to be fiscally responsible, then I want some semblance of control.

19 Comments
Highlighted
Anonymous
Not applicable

Op Ed - Auto Sales Tax in QBO

@Rustler

 

Thank you for sharing your op-ed and your evaluation of the Auto Sales Tax tool in QBO. This is something I will share directly with the Product team.

 

From what I gather, you recommend new users set up their reporting in Accounts and Settings > Advanced > Accounting and set their method to "Cash basis" accounting, then go to the Tax Tab to set up their rates manually? 

 

Do you see this as a potential issue for folks who only deal with sales in multiple states? What about a local store who generally only sells within their county? 

 

Also, are you aware of any documentation for the Amazon fulfilment centre scenario? 

Highlighted
Level 15

Op Ed - Auto Sales Tax in QBO


@Anonymous wrote:

@Rustler

 

Thank you for sharing your op-ed and your evaluation of the Auto Sales Tax tool in QBO. This is something I will share directly with the Product team.

 

From what I gather, you recommend new users set up their reporting in Accounts and Settings > Advanced > Accounting and set their method to "Cash basis" accounting, then go to the Tax Tab to set up their rates manually? 

 YES

Do you see this as a potential issue for folks who only deal with sales in multiple states? What about a local store who generally only sells within their county? 

If all you do is sell locally, then that makes it easier.  I would still not use auto sales tax, there are too many unknowns, too many intuit secrets about how it works.

 

Also, are you aware of any documentation for the Amazon fulfilment centre scenario? 


This affects everyone, and more so for states that are NOT destination based.

 

I asked Taxify, a sales tax service you can add on to QB, if they have a listing of required reporting basis per state - never heard of such a thing ! ! ! 

So much for them doing things right.

 

the net is full of amazon articles explaining fulfillment centers and amazon collecting sales tax in other states.

 

It is also the individual state reporting that is going to be a hassle, states require a no sales tax due filing if there is no sales tax due, missing that incurs a penalty just as missing an actual sales tax filing does.  And not all states have the same due dates for returns.  Oh and let's not forget the frequency of sales tax reporting is determined by the state too.

Highlighted
Anonymous
Not applicable

Op Ed - Auto Sales Tax in QBO

Hey @Rustler,

 

Thanks for clarifying those points, I think this will help demystify the process for newcomers. Do you know of any centralized repository that cites all of these tax laws, on a single page side-by-side, short of actually visiting the Department of Revenue for every state? As you note the importance of evidence and compliance, I want to steer folks towards the best information.

 

What was Taxify's response? They simply had no idea? @KamalVarma may also be able to add some insight into revenue recognition in relation to the increasingly complex sales tax process.

 

Any articles you think are the best source of truth, @Rustler? Since you probably already know a good source, I'd appreciate you sharing that with the community.

 

So, perhaps a solve on the QBO end is having the system API automatically pull live filing data/dates from the tax revenue sites and send the appropriate set of reminders based on what states you've recorded in QuickBooks Online?

Highlighted
Level 15

Op Ed - Auto Sales Tax in QBO

Here is a good one, cropped up today in the L/S community

 

QBO auto sales tax error
You’re not set up to collect sales tax for this sale. If you need to collect tax, go to your sales tax settings and add/update the appropriate tax agency.

 

intuit answer - You'll get this message once you assign a Sales tax to an invoice having a Shipping Address that hasn't been set up in the Sales Tax Center

 

See total lack of control.  This implies that a shipping address has to be set up ahead of time!

 

------------

As far as auto sales tax and listings of requirements, seems to me the people to ask would be the intuit folks tasked with making this work - ahhh assuming that is in fact a task.  All too often intuit puts out a poorly thought out, partial procedure, and rarely does anything else to it.

 

Evidently, you and I are the only ones interested in this topic at all, so be it.  

Highlighted
Anonymous
Not applicable

Op Ed - Auto Sales Tax in QBO

@Rustler, I am glad you're passionate about it, and asking the important questions. I am sending all of this along to the Product team.

 

Any citations for Amazon? If that's a path to success for folks, I'd like to stake it on some data. 

 

Also, still super curious about Taxify's response. 

Highlighted
Level 10

Op Ed - Auto Sales Tax in QBO

I pointed out this back in November 2017.
https://feedback.qbo.intuit.com/forums/168199-quickbooks-online-feature-requests/suggestions/3233767...

 

I asked this very question when they first rolled out this new automated sales tax system.
Q: Based on company address setup, can you flag if the sales tax filing should be based on cash or accrual basis method?
A: Currently, only Accrual basis is supported with the automated sales tax feature. No companies who have been set to Cash basis will be enrolled in this feature until cash basis support is available.

Based on this answer, we now know how at least they rolled out this new automated sales tax system.

 

Question: how many actual QBO users actually even go to advanced setting and change to Cash accounting method?
Not too many based on my experience. It seems like that's how the mess started. In the old sales tax center at least, you had the ability to toggle to Cash/Accrual basis reports. That's why it was a non-issue. You can't do that in new Automated Sales Tax System because they thought they were only migrating to Accrual basis method only. Wrong!

 

They are saying the sales tax list is compiled using the tax codes available through Exactor (a company who has mastered sales tax, which Intuit has recently acquired) and will be using their database to calculate sales taxes.
What if they are not up-to-date (many times they'are not) and need to add optional rate to compute sales tax. Currently, you can't add additional rate to create sales forms. You can edit and change the amount one-time but that's not a solution at all.

 

At the minimum, wish they offer these yesterday:
1) Ability to toggle to Cash/accrual basis from the Sales Tax Center.
2) Ability to add optional rate.
3) Direct hotline phone number, preferably Exactor support.
4) Reports - sales by county, city, state, out-of-state. And non-taxable sales report.

 

There are many other issues as Rustler correctly pointed out. Thank you, for @ Dxxxx 3! #lol

Highlighted
Level 10

Op Ed - Auto Sales Tax in QBO

This's what was published back in February 2018.
"Migration for existing companies will begin in January 2018 and have a staggered rollout throughout 2018."
http://km-ext.ebs-dam.intuit.com/content/dam/km/external/AHH/Feb%206%20FAQ.pdf

 

Once you're migrated to automated sales tax system there is no option to switch back to old manual Sales Tax Center. In other words, you can't change it even if edit to Cash accounting method in the Advanced setting.

 

You're stuck!

Highlighted
Level 15

Op Ed - Auto Sales Tax in QBO

Taxify said I should talk to a cpa.  which is wrong - a cpa opinion has nothing to do with it

 

what I am curious about is how many people have been filing sales tax on a cash basis when the requirement is accrual?

 

An easy way to tell if your state is accrual, if you are too lazy to look it up or call and ask - visit one of the furniture stores that allow years and years to pay with no interest - if you have to pay the sales tax up front as a lump sum, that is accrual.  The business has the sales tax liability as of the sale date.

Highlighted
Level 15

Op Ed - Auto Sales Tax in QBO


@Anonymous wrote:

@Rustler, I am glad you're passionate about it, and asking the important questions. I am sending all of this along to the Product team.

 

Passionate??? Disgusted with intuit and the legal ramification to users that intuit does not care about.

 

Any citations for Amazon? If that's a path to success for folks, I'd like to stake it on some data. 

Where in the  world do you get a path for success from anything I wrote about amazon?

 

Sorry James, but this is typical of intuit support, I mention things, that have obviously been looked up on the net, and rather than doing your own due diligence you ask for links, cites, and articles.

 

On a related topic, user legal issues due to intuit creating accounting software that does not adhere to basic accounting rules, here is a good one,

http://www.cpa-connecticut.com/blog/?p=2057

 

Also, still super curious about Taxify's response. 


 

Highlighted
Anonymous
Not applicable

Op Ed - Auto Sales Tax in QBO

@Rustler As long as the furniture store isn't up to any funny business ><...

Highlighted
Level 10

Op Ed - Auto Sales Tax in QBO

Before setting up sales tax, they should ask this question:

"Do You Report Sales Tax on a Cash Basis or Accrual?"

Give necessary instructions (before it's too late)!

 

setup_sales_tax1.png

Highlighted
Level 15

Op Ed - Auto Sales Tax in QBO


@vpcontroller wrote:

Before setting up sales tax, they should ask this question:

"Do You Report Sales Tax on a Cash Basis or Accrual?"

Give necessary instructions (before it's too late)!

 

 


That would help, but the truth is they should scrap auto sales tax altogether

they obviously do not have a handle on it at all

and sadly if things get even more complicated in the sales tax arena, I can see compliance issues and maybe fines and penalties all directly a result of intuits incompetence.

 

A user is going to have no idea, hell most of the certified folks I talked to behind the scenes were not even aware that sales tax basis was determined by the state.

 

Highlighted
Level 10

Op Ed - Auto Sales Tax in QBO

If Intuit can't scrap the new automated sales tax system and bring back old sales tax function as discussed here, they should at least release few new updates before migrating massive new users.

 

These are very helpful feedback requests which can be easily implemented:

 

1) Prior to actually setting up sales tax - provide necessary background instructions on reporting sales tax on a Cash basis vs. Accrual. Exactor, a company who has mastered sales tax as they claim if true, the system should have some intelligence built-in to detect whether to file accrual or cash basis. After all, they already have access to QBO company name and address file.

 

2) Ability to toggle to Cash/accrual basis from the Sales Tax Center. This is for reporting cash basis who can't back to old one.

 

3) Option to add additional rate. When you know tax is not auto-populating correctly on the Sales forms and the tax rate is not up-to-date, what good option do actual users have anyway? They can use this solve immediate issue.

 

4) Direct hotline phone number to deal specific issues with automated sales tax system, preferably Exactor support. At present, support specialists are not up-to-date, still referring to old features.

 

5) Sales and Sales Tax Reports - currently reports are highly inadequate. They should introduce new sales reports filterable by sales by county, city, state, out-of-state. And also update existing current taxable sales report to include non-taxable sales to help file sales tax return. Again, the sales tax report should be tailored to what information they need to actually file the tax return. Good to know Intuit has recently acquired Exactor, a company who has mastered sales tax. Show us your expertise and some good reports.

 

6) Recording Sales Tax Payment (accounting issue) - this should somehow sync with creating vendor expense form. Currently, the only option is to record tax payment in the Sales Tax Center which doesn't work (accounting wise) if you actually need to PRINT a check in QBO. It creates duplicate transactions.

 

My hope is influential Intuit product managers read this blog and take it as positive tips.

Highlighted
Level 15

Op Ed - Auto Sales Tax in QBO


@vpcontroller wrote:

 

 

My hope is influential Intuit product managers read this blog and take it as positive tips.


Oh god, thanks for that, great way to start the week with a laugh.

a double oxymoron in one statement - that is talent.

 

Taxify supposedly has a handle on it too, yet they had no idea concerning sales tax basis.

 

I have not touched base with avalara since they insist on collecting my data though their form - I need more sales emails like I need ......

 

This push to automation is the problem, as simple as Texas sales tax is, and compared to California and others believe me mine is simple, it still has multiple scenarios that can not be address with auto sales tax.

 

Unless, you can set up the tax rate for those scenarios in auto sales tax, and then choose the one that applies to that particular sale it is not going to work.  But hey if you are going to do that, why bother with auto sales tax at all - that is the way it has always worked.

Highlighted
Level 10

Op Ed - Auto Sales Tax in QBO

Thank you, @Rustler !

Highlighted
Level 2

Op Ed - Auto Sales Tax in QBO

This new Auto Sales Tax in QBO is a huge problem in the State of Colorado where we have different sales tax rates for different sides of the street (literally in some places). And based on where the product is delivered to the customer, we will remit sales taxes to two different agencies. For example, I deliver a product to a customer in Littleton, Colorado - I need to collect and remit city taxes to the City of Littleton and collect and remit state, county, and special district taxes to the Colorado Dept of Revenue. The new sales tax module does not let me charge sales tax for the two different agencies, nor can I set up a sales tax rate that encompasses all of these tax elements. I can override the sales tax amount on an invoice, but it doesn't ask me where the extra taxes are to go - it just distributes them amongst the other elements of whichever sales tax rate I chose.  

 

This is unacceptable, QuickBooks. Figure out your sh*t or let us go back to the old sales tax center where we could control our sales tax agencies and rates to make sure we are doing it CORRECTLY. I dread the day my clients on the old module are "upgraded".  

 

Supposedly I have an "escalated" case that was sent to the Sales Tax Department but I have no faith it's going to get resolved. In the meantime, I'm scrambling to come up with a solution so my clients can charge the correct sales tax. I might just have to switch accounting systems...

Highlighted
Level 15

Op Ed - Auto Sales Tax in QBO

Another example of the debacle auto sales tax is causing

The new sales tax center is showing last year's sales tax payment against this year and it won't allow me to delete or update it. I can't record the current payments for this years period. No option to delete or update. The new design is not flexible.

 

https://community.intuit.com/questions/1737856-how-do-i-go-back-to-the-old-sales-tax-center-in-the-q...

Highlighted
Level 1

Op Ed - Auto Sales Tax in QBO

It would have been nice if Intuit had better instructed one of my clients about setting cash basis first when turning on sales tax and auto sales tax. He only works in one state but when invoicing clients in different cities the program is pulling the wrong county (in some cases it adds 2 different counties), wrong district rate etc. I was told after 3 hours with pro advisor support that he should have set his reporting to cash when setting up and his only option is to start a new data file. He is on annual reporting and now is past due as we are trying to clean this up so he can file an accurate report. They should never have released this tool without an option to remove and enter tax items manually. They said he could override the amounts (too late on most invoices now) but that doesn't help figuring out which counties and districts we need to report. Poor planning for sure on INtuits part.

 

Highlighted
Level 2

Op Ed - Auto Sales Tax in QBO

California recently changed agencies. No more BOE in all of California. It is now CDTFA. Here in California- months after the change of agencies that affects the ENTIRE state of California. What?!!

 

Quickbooks gives no option to update this change in the system.

 

In addition, there is no way to record properly and no one can help in their support department to record the filing requirement of prepayment monthly along with filing quarterly. I can't imagine that I am the only one to have this problem.

 

I've been a big advocate of quickbooks online.  They've made some really big mistakes and taken no responsibilities for these problems (filed a 941 when they were not authorized). 

 

Intuit how are you going to fix these problems? Along with your abysmal customer service.

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