Space for pervasive banner when authenticated
Create or delete a sales tax adjustment in QuickBooks Online
Learn how to adjust your sales tax due if you use automated sales tax in QuickBooks Online.
With automated sales tax, it’s easy to keep your sales tax records accurate. If you received a tax credit, discount, or fine, you can adjust the sales tax you owe. This way you don’t have to worry about making corrections when it’s time to file.
Here are a few reasons you might make a sales tax adjustment:
Credit: a credit received from the agency.
Prepayment: an additional payment for a future return in the current filing period.
Prior prepayment: a prepayment that was made previously.
Penalty: amount due to the agency for late payment or non-compliance.
Rounding: small differences due to rounding calculations.
What happens when you choose a specific account type for adjusting sales tax on a sales tax return?
When you create a sales tax adjustment, the amount payable will either increase or decrease depending on the account type you select. Please consult your accountant or tax professional if you’re unsure of the correct adjustment account for your situation.
The following table shows the results of choosing different account types:
| Account selected | Effect on sales tax return | Journal entry of sales tax adjustment | Effect on your reports |
| Income/Other income | Sales Tax payable goes down | Debit: Sales tax liability account Credit: Income account | Profit/Loss: Your chosen income account increases. Balance Sheet: The amount payable to the tax agency decreases. |
| Expense/Other expenses | Sales Tax payable goes up | Debit: Expense account Credit: Sales tax liability account | Profit/Loss: My chosen expense account increases. Balance Sheet: The amount payable to the tax agency increases. |
| Asset | Sales Tax payable goes down | Debit: Sales tax liability account Credit: Asset account | Profit/Loss: No effect Balance Sheet: The amount payable to the tax agency decreases and your chosen asset account balance decreases. |
| Liability | Sales Tax payable goes down | Debit: Liability account Credit: Sales tax liability account | Profit/Loss: No effect Balance Sheet: The amount payable to the tax agency increases and your chosen liability account balance increases. |
Why can’t you choose the sales tax liability account (like the California Department of Tax and Fee Administration) on your adjustment?
When you enter a sales tax adjustment, you’re creating a double entry transaction. One side of the transaction will always be your sales tax liability account. You only need to select the other side of that transaction on the adjustment form. You’ll never need to select the sales tax liability account as that would create a debit and a credit to the same account, which cancels itself out.
Using negative amounts on your sales tax adjustments
You can use negative values for sales tax adjustments. For example, if you need to have a single account for rounding differences.
You can add negative values to all adjustment types. The table below shows the impact of using positive and negative values for the account type selected.
| Account type selected | Positive/negative value | Debit | Credit | Effect on sales tax return |
| Income | Positive | Sales tax liability account | Income account | Decreases sales tax due |
| Expense | Positive | Expense account | Sales tax liability account | Increases sales tax due |
| Income | Negative | Income account | Sales tax liability account | Increases sales tax due |
| Expense | Negative | Sales tax liability account | Expense account | Decreases sales tax due |
Here’s how to add or delete a sales tax adjustment in QuickBooks Online.
Note: If you need help entering your sales tax adjustment, please consult your accountant or tax advisor.
Add a sales tax adjustment
Step 1: Set up an account for sales tax adjustment
It’s important to use the correct account type when adjusting sales tax. Set up an expense or liability account if you need to increase your sales tax due. Or setup an income or asset account if you need to decrease your sales tax due.
Note: To add a new account, switch to Accountant View. If you already have these accounts, move on to creating the adjustment in Step 2.
Go to All apps
, then Accounting, then Chart of accounts (Take me there).Select New.
From the Account Type ▼ dropdown, select Income or Expenses.
If you need to decrease your sales tax due, set up an income or asset account.
If you need to increase your sales tax due, set up an expense or liability account.
Select the account’s Detail Type.
Use Sales of Product Income for an income account.
Use Taxes Paid for an expense account.
Name your adjustment account (for example, sales tax due increase).
Select Save and Close.
Step 2: Add an adjustment
Select Sales tax (Take me there).
Select the tax agency, then the return period you wish to adjust. Then select View summary.
Select Add adjustment to books.
Select the reason for the adjustment from the Reason ▼ dropdown menu.
Add an adjustment date.
Select the account for adjusting sales tax from the Account ▼ dropdown menu.
Choose an expense account if you need to increase the tax due.
Choose an income account if you need to decrease the tax due.
Enter the adjustment amount.
Select Save.
Filing your sales tax with QuickBooks?
You can file your sales tax with QuickBooks if you’re subscribed to Sales Tax Essentials and you are in certain states. Sales Tax Essentials is an add-on that'll eventually be available in all states. Once subscribed, you can review the return prepared for you, and file and pay with QuickBooks.
To change the amount you pay to the agency, add an adjustment to your return.
Go to Sales tax, find the agency and tax period marked ‘Due’, and select File return.
In the Adjustments section, expand the accordion and select Add adjustment.
Select the reason for the adjustment from the Reason ▼ dropdown menu.
Add an adjustment date.
Select the account for adjusting sales tax from the Account ▼ dropdown menu.
Choose an expense account if you need to increase the tax due.
Choose an income account if you need to decrease the tax due.
Enter the adjustment amount.
Select Save.
This updates the amount you pay to the agency and your books. If you want to adjust the total tax due for the period without changing the amount you pay to the agency, add the adjustment to the View summary page.
Note: Discount and Use tax have their own sections in the return. Use those fields instead of adding them as an adjustment.
If you don’t file with QuickBooks, you can add any adjustments to the summary page before recording your payment.
Delete a sales tax adjustment
You can also remove an incorrect sales tax adjustment. After deleting the adjustment, you’ll no longer see it when you review your sales tax summary on the Sales taxes page.
Select Sales tax (Take me there).
Select the tax agency, then the return period which has been adjusted. Then select View summary.
Find the adjustment.
Select Delete.
Select Delete again to confirm.
If you’re filing sales tax with QuickBooks and the adjustment was included in your return, any changes must be made within the return. Select View in return to find the adjustment.
If the return has not been submitted yet, you can delete the adjustment by selecting the delete icon.
If the return has already been filed, deleting the adjustment will cause your books to not match the agency’s records. If you want to correct the sales tax amount, you can add an adjustment to your next return.
Sign in now for personalized help
See articles customized for your product and join our large community of QuickBooks users.
Call Sales: 1-800-365-9606
