New auto tax system problems. Tax rates changed from custom to location (w/wrong rates); clients marked tax exempt; pmts in wrong tax liability month. Any ideas?

Let's look into our sales tax setup, bowmand. 

Once we set up our tax agency we automatically set the rates for you. The calculation of our sales taxes depends on the following: 

• Your customer’s tax exempt status
• Where you sell and where you ship
• Your service or product’s tax category

We can go to the Sales tax center to check the agencies address. Just click the Taxes menu and select Sales Tax. At the upper-right, click Sales tax settings. For us to look into the customer's tax exempt status, here' how to check it.  

1. Go to the Sales menu and select Customers. 
2. Click on the Customer's name and select the Customer Details tab. Then, Edit. 
3. Update the customer's tax exemption under the Tax info tab. 
4. Click Save. 

When we create an invoice with the information, click on See the math to see how the invoice was calculated. The rates are also stated there. 

For more details on how to review out sales tax setup, refer to these articles:

• Set up and use automated sales tax in QuickBooks Online
• Use the Automated Sales Tax Center

If there were unnecessary changes made to our setup we can check the Audit Log report. 

Reach out to me if you need anything else. Keep safe!

No, this is not it. We have been sending recurring invoices to clients with no problems until February. Every invoice in February was a recurring invoice, and every payment received was against a recurring invoice. Then the QB February Tax return was wildly off. Gross sales and taxable sales were different for the first time, by more than $1K, and neither matched the actual transaction reports of payments received for the month. When looking for the reason, I noticed the following problems.

(1) Some clients were marked as tax exempt while others were not (none of them are tax exempt). We never marked anyone as tax exempt, and there doesn't seem to be a pattern to indicate which ones were marked by QB as tax exempt--it seems random. In fact, in March, I had to go back to invoices for about 1/2 of the clients and add the tax to their invoices manually, even though they were correctly taxed in prior months and the invoice template has the custom tax rate. They received invoices with no taxes, and I had to edit their invoices to add the tax and send a new invoice.

(2) Several payments received in late January showed up in the February tax return, even though the payment date is January.

(3) Every recurring invoice was set up with a custom tax rate, but many clients suddenly changed to other rates determined by QB. Example: All invoice templates were set up with the custom rate of 8.4375%, but the tax liability reports shows the clients as taxable at the state rate of 5.25%. Note that we did not include clients addresses in their profiles and our address has not changed, either. Others show the correct rate based on our business location, which is confusing but acceptable, but still not the custom rate used in the invoice template. I can't figure out how to change them back to the custom rate, even though it is in their recurring invoice template.

After 20+ hours of "clean-up," I still can't get the gross and taxable sales to match, and I still can't get either one to match the actual transaction reports of payments received during February. I had resisted changing to the new tax center until I was automatically transitioned. That was when these problems seemed to occur.

Hello there, bowmand,

You'll want to use the audit log feature to check if there are changes made on your customer's account. QuickBooks Online doesn't change customers to tax exempt automatically.

1. Click the Gear icon.
2. Select Audit Log.
3. Select Filter.
4. Use the fields on the Filter panel to choose the appropriate User, Date, or Events filter to narrow the results.
5. Select Apply.

Furthermore, invoice payments still depends on the transaction date. For example, if the invoice is for February but the client paid in advance in the month of January, it will still reflect on the month for the transaction date.

As for the automated sales tax, you can set up custom tax rates. Here's how:

1. Click Taxes on the left pane.
2. Select Sales tax.
3. Select Sales tax settings.
4. In the Custom rates section, select Add rate.
5. Select Single or Combined.
6. Enter the Name of the custom rate. If adding a combined rate, enter a Nickname for each rate you need to combine as one custom rate.
7. Select the Agency you file payments to.
8. Enter the Rate, then Save.

Learn more about the process here: Use custom rates to manually calculate taxes on invoices or receipts.

I'll be around if you have additional questions.