Can I record a use (or sometimes referred to as "usage") tax in QuickBooks Online?

Hello there, Joseph. I'll share some steps to help you record the usage tax in QuickBooks Online (QBO). 

To start, you have to set up an out-of-state vendor in your account. 

1. Select the +New menu and choose Add vendor.
2. Click the New vendor button.
3. Enter the name of the vendor and other details.
4. Then, go to the Other box and enter Outstate.
5. When done, select Save.

You have to use this vendor when you buy the items subject to usage tax for easy tracking.

Once finished, run the Transaction Detail by Account report for each use period. Here's how:

1. Navigate to the Reports menu and type Transaction Detail by Account in the search bar.
2. Next, click the Filter option and select Account. 
3. In the Operation box, select equals, and in the Value dropdown select all the payment accounts you use.
4. Then, click the + Add filter button and choose Vendor name. Select Equals in the Operation field and pick all your out-of-state vendors.
5. When done, click Save.

After that, you have to multiply the report balance by the Use Tax percentage to find the total use tax owed to that vendor.

For additional information, you can read this article: Track Usage tax. Please know that this is for QuickBooks Desktop (QBDT) but the idea will still apply to QBO.

I also recommend, reaching out to your accountant for additional guidance in recording the usage tax. If you're not affiliated with one, you can go to our Find a ProAdvisor page to look for one near you.

You might also want to configure your sales taxes to make sure everything is accounted for accurately. Read this reference for guidance: Set up your sales tax in QuickBooks Online.

I'll be here ready to lend a hand if you have other concerns managing your item taxes. Please don't hesitate to leave a reply below. Have a good one and stay safe.

Good morning, I have seen this answer posted before, but it doesn't work for what I am needing. I need it to show up on my Sales Tax Liability Report for the reporting period (each calendar month), as well as show up on my Balance Sheet for the monthly report.

As I said earlier, I was able to do it in the Desktop version of QuickBooks, but cannot seem to get it to post the same way in QuickBooks Online. I have contacted my tax advisor, and while they also use Quickbooks, they are unsure of how to correctly get it to post and show with the online version. We pay our Sales Tax and Use tax on one check to the state.

There has to be a way that this can be done without reinventing the wheel. From the digging that I have done, it appears that we are not the only business that is trying to figure this out with the online version. If someone could possibly help in figuring out a solution, it would be greatly appreciated not only by me, but apparently by a large group of others as well! Thank you!

Thank you for the prompt response, joseph.

The usage tax is exclusive to QuickBooks Desktop. As a workaround in QuickBooks Online, we can create a different tax rate for the usage tax.

Here are the next steps after creating the custom tax rate for the Use tax.

1. Go to the Gear icon. Under Lists, select Products and Services.
2. Click the New drop-down arrow to create a new product called Use Tax Income Offset using the same income account used when selling products.
3. Under Sales tax, click Edit sales tax and the Nontaxable.
4. Afterward, create a new expense account, Use Tax Expense in your Chart of Accounts if you don't already have one.
5. Back in the Products and Services list, create a new product called Use Tax Expense that is not taxable using the Use Tax Expense account.
6. Use a sales transaction (sales receipt or invoice) to record the products used and either use a "house" customer account or the actual customer that it is used for and change the tax rate to the Use Tax rate.
7. Change the rate of the product from the sales price to the cost.
8. Add the Use Tax Income Offset item and put the negative of the cost above.
9. Add the Use Tax Expense item and put the negative of the tax amount below. 
10. Once done, this will zero out the Sales Receipt. click Save and Close.

The Sales Tax Center and Sales Tax Liability report will now show the Use Tax amount due and will be included when you Record Tax Payment.

For future reference, you can read these articles to help you customize reports and save the customization: 

• Customize reports in QuickBooks Online.
• Memorize reports in QuickBooks Online.

Should you need additional assistance in your reports in QuickBooks Online, feel free to include them in the comments below.

I am having this same issue, did you ever resolve it? In QB desktop we created a journal entry debiting a use tax expense account and crediting the sales tax payable account, and once we'd got to Pay sales tax it would be there to select and include in the payment with the other tax rates, now in QBO I am not able to do this and in addition to that all my previous months that I had paid sales tax for show overdue.

Hi there, Stephanie. I can show you how to pay your sales tax using the usage in QuickBooks Online (QBO).

In QBO, there's no need to create a journal entry for recording expenses. You can create an expense account in your chart of accounts if you don't have one.

Moreover, when paying a sales tax in QBO, you can adjust your sales tax payment by accessing the taxes tab.

Here's how:

1. Go to Taxes, then select Sales tax.
2. Enter the Due Date Start dropdown, then select Refresh.
3. Locate the tax period you want to adjust. Then, click View Return.
4. Click Add an adjustment.
5. Select a reason for the adjustment from the Reason dropdown menu.
6. Add the adjustment date.
7. Choose an account for adjusting sales tax from the Account dropdown menu.
8. Enter the adjustment amount.
9. Select Add.

Refer to this article to learn how to remove a sales tax adjustment in QBO: Create or delete a sales tax adjustment in QuickBooks Online

Furthermore, you can refer to this article to learn how to use the sales tax liability report and how much sales tax you owe in QBO: Check how much sales tax you owe in QuickBooks Online

Please don't hesitate to comment if you still have concerns about paying your sales tax in QBO. I'm always here to help.

Hi Stephanie,

I actually never found an easy way to have the Use Tax show up on our tax liability report where it can be added in to the total Sales Tax due for the month, and paid on a single check. So what I have to do is have a Use Tax payable account as well as a Use Tax expense account. When I need to enter the Use Tax due from a vendor's invoice, I create a Bill that has the Use Tax amount applied to the Payable account as well as the Expense account, creating a bill of $0.

Then at the month's end, when I am paying our normal Sales Tax, I pay the Sales Tax due that QB calculates, but I also have to now enter a Check against the Use Tax payable account to offset that as well. It seems silly to have to do it this way, but I have not been advised or learned of an easier way. The only issue it creates is that if you pay both on the same check through a third party site (such as your state's site), in QB it shows as two payments and not one. So reconciling the expenses against a checking account register or credit card register makes you be aware that it will show as one expense on your side, but two in QB.

Hopefully this makes sense!

With all the engineers and tech people that Intuit has, I was hoping there would be an easier way to do it, but as I said, I have yet to hear or see an easier option.

this is ridiculous and needs to be fixed. you should be able to clearly see with a line in the chart of accounts on your balance sheet, the use tax vs tax on invoices or sales.

when is this going to be fixed. this does not work.

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the sales tax liability report will see a general journal entry, but sees the payment as a credit so your balance sheet shows you have overpaid your state taxes.

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i've got three weeks into trying this new module. its absurb.

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I recognize the significance of accurately managing taxes in a business, leecross. This experience is not what we want you to go through.

You can consider creating a separate account in your Chart of Accounts to track usage tax separately from sales tax in QuickBooks Online since the Usage Tax feature is unavailable. Feel free to follow the steps provided by my colleague, MelroseV, to set this up.

Additionally, you can review the Sales Tax Liability report to ensure that the payments are properly recorded and not double-counted on the Balance Sheet. It may also be helpful to consult with your accountant for further assistance with this issue. They can offer other options or advice on how to handle this matter.

On the other hand, I recommend sending feedback to our product development team for this functionality to be implemented in the future. You can also input the need to see the use tax vs. tax when running the Balance Sheet. Our engineers will thoroughly review all of your suggestions and recommendations.

To send your input, follow these steps:

1. Go to the Gear icon, then choose Feedback.
2. Type in your ideas, suggestions, or recommendations. 
3. Hit Next to submit.
    

You can track your recommendations through our QuickBooks Online Feature Requests website. 

For additional resources, check out these articles to help manage your sales transactions efficiently:

• Use reports to see your sales and inventory status. 
• Learn how QuickBooks calculates sales tax
• Set up and track your inventory.

We deeply value your experience, leecross. Your feedback is important to us, and we are committed to addressing all your concerns. If you have any queries, please share them with us below.

Hi MelroseV, in your answer you have this sentence:

"Here are the next steps after creating the custom tax rate for the Use tax."

Can you please tell me how to create the custom tax rate for the Use tax? Or is there some place with all the steps from zero to logging use tax and having it show up for the quarterly sales tax filing?

Thank you.

Thank you for chiming in to this thread, @MitataAviation. You can create a custom tax rate for the Use tax in QuickBooks Online (QBO) by hovering over the Taxes menu.

It's my pleasure to show you how:

1. On the left navigational panel, look for the Taxes menu.
2. Choose Sales tax.
3. Under the Related Tasks list on the right, select Add/edit tax rates and agencies.
4. Select New and choose either a single or a combined tax rate.
5. Enter a name for the tax, the agency you pay, and the percentage for the rate. Use a single rate if you pay just one rate to a single agency.
6. Click Save.

For your reference, I've added this article: Set up your sales tax in QuickBooks Online.

Once done setting up the Use Tax rate and corresponding liability account, diligently record each transaction where Use Tax applies by selecting the new tax rate on relevant expense entries. The applied Use Tax will automatically accrue in your Use Tax Payable liability account.

Furthermore, I suggest including the Use Tax amount with your regular sales tax payment when submitting your tax filings to ensure compliance with local tax regulations and maintain precise financial records.

Additionally, if you want to edit sales tax rates, here's an article you can browse through that can be handy moving forward: Edit sales tax rate in QuickBooks Online.

Keep in mind that I'm committed to making sure you have all the support you need to succeed. If there are any other aspects of QuickBooks that you're curious about or need help with, don’t hesitate to ask. Wishing you continued success and looking forward to assisting you further.

I know this is an old post, but something I do is use a JE to transfer the use tax payable to the sales tax payable account at the end of each month. That way you only have to record one payment. Hope that helps someone!