Set up your sales tax in QuickBooks Online

To add a tax rate and agency:

1. Go to Sales Tax (Take me there).
2. First-time users will need to click Get Started. Complete the guided workflow for the state you need to record Sales Tax toward
3. If additional state Sales Tax is required, select Sales Tax Settings, Select New, and choose either a single or a combined tax rate.
4. 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.
5. Select Save.

If you're required to track sales tax for more than one tax agency, consider setting up a combined tax rate. For example, you might need to report and pay out sales tax to your city, to your county, and to your state.

Things to know

• With a combined tax rate, your customer sees only one tax rate on their sales form. However, the Sales Tax Center keeps track and splits out the proper amounts for each agency.
• You can add up to 7 components to a combined tax rate.
  • Classic sales tax offers 5 maximum combined rates
  • Automated sales tax offers 7 maximum combined rates

To add a combined tax rate: 

1. Go to Sales Tax, then select Sales Tax Settings (Take me there).
2. Add Custom Rate in the Add Agency dropdown menu.
3. Select Combined tax rate.
4. Enter a name for the combined rate and the different sales tax requirements.
5. If necessary, select Add Another Rate to add more than two rates.
6. Select Save.

Once you're done, a few things will happen:

• The new rate appears in the Sales Tax Rate and Agencies list.
• You can now select the new combined rate in forms like invoices.
• You can view the amounts owed to each agency in the Sales Tax Owed list in the Sales Tax Center.
• You can view the Sales Tax Liability report.

Things to know:

• You can edit a sales tax rate if you need to make changes to it.
• You can only edit component rates.
• To edit a combined rate, make changes to its component rates.

To edit a tax rate:

1. Go to Sales Tax, then select Sales Tax Settings (Take me there).
2. Select the Custom Rates list.
3. Choose the rate that you want to change, then select Edit.
4. Enter the new rate. You can also change the agency's name.
5. Select Save.

Once you're done, a few things will happen:

• The new rate is available for new transactions only.
• If you create a new transaction but use dates from the past, the transaction uses the new rate.
• Once you edit a rate, the earlier rate can no longer be used.
• Existing transactions that used the earlier rate remain unchanged. Unless you edit the transaction and specifically select a different sales tax rate.
• For recurring templates that use the changed component, new transactions created with the template use the new rate. Existing transactions created with the template and the earlier rate remain unchanged.
• Reports show the data for both rates (before and after).

Things to know:

• You can't make changes to the Tax Rate field.
• If the rate needs to change, deactivate the existing tax name and rate.
• Then create a new tax with the rate you want.

To edit an agency's name:

1. Go to Sales Tax Settings, then Sales tax (Take me there).
2. Under the agency name that you want to edit, select rename.
3. Enter the new name, then select Save.

1. Go to Sales Tax, then Sales Tax Settings (Take me there).
2. Within each sales tax agency specific method, you can change the sales tax center.

For more information regarding the Accounting Basis, see the difference between cash and accrual accounting methods.

You can turn sales tax on or off by editing sales tax settings.

1. Go to Sales Tax, then Sales Tax Settings (Take me there).
2. Select Yes, if you charge sales tax.
3. (Optional) Set the following options:
   • Set a default tax rate. The default rate is automatically selected in new sales forms. You can choose a different rate if needed. If you choose a different rate for a particular customer, QuickBooks Online remembers the rate for that customer and overrides the default rate.
   • Select Mark all new customers are taxable. This means new customers you add aren't tax-exempt. You can change this setting for individual customers in the Tax Info section of each customer record.
   • Select Mark all new products and services are taxable. This means items you add to a form have the Tax column already selected. You can clear individual items in a form if you don't need to charge sales tax.
4. Select No if you don't charge sales tax. If you already charged sales tax on earlier transactions, you won't be able to disable sales tax without first removing sales tax from those earlier transactions.
5. Select Save.

1. Go to Sales Tax, then Sales Tax Settings (Take me there).
2. Choose a tax rate name and select Edit.
3. Select Make Inactive.

For additional information:

To know how to apply these tax rates to specific transactions, refer to Applying sales tax rates to transactions and sales forms.

For more details regarding Sales tax in QuickBooks Online, refer to Sales tax in QuickBooks Online.