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Set up and use automated sales tax in QuickBooks Online
Learn how to set up and use the automated sales tax feature in QuickBooks Online.
QuickBookscan automatically do the sales tax calculations for you on your invoices and receipts for easy and accurate filings. Then, it lets you know when your tax payment is due, so you can file on time and avoid extra fees.
Here's how to set it all up and get started:
We're rolling out automated sales tax for all QuickBooks users. If you still use manual sales tax, we'll also help you switch to the new sales tax system.
If you want to track sales tax manually, you have the option to use custom rates on invoices and receipts. You can use custom rates to manually track special taxes like meals or excise tax. Or, use custom rates if you feel more confident tracking sales tax manually.
This video will go over how to set up sales tax in QuickBooks Online.
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Video transcript
[0:00] If you sell taxable products or services, QuickBooks helps you track how much sales tax to charge. If you use this feature, you should know how much you need to pay when you file your state and local sales tax. Let's go over how to set up sales tax. Navigate to All Apps and then Sales Tax settings in the Sales Tax section. Navigate to Turn on sales tax.
[0:22] Make sure you have the following necessary info before turning on sales tax, and click Next. Enter your business' address. This address sets up your sales tax rates. If this is already in your company settings, just confirm that it's correct and select Next. There are different rules in different states for when to collect and remit sales tax, and on this step what agencies to configure.
[0:46] The three concepts to consider for when to set up an agency are Physical nexus (do you have a business presence in a state - could be location or employee), economic nexus (do you sell over a certain threshold, either as transactions, total sales value, or combination), and state-administered and/or local-administered, one agency for the state that includes any local jurisdictions or local agencies in addition to the state agency.
[1:15] Every state has different requirements for how often you need to make sales tax payments. In this example, the frequency for filing taxes depends on the average amount of sales tax you collect on a yearly or monthly basis.
[1:29] Remember, your state or local laws might be different from each other, So check with the state website or your accountant if unsure which frequency is applicable for your company. Now, select the Filing Frequency drop down menu, and choose how often you file sales tax. If the filing frequency is different for other rates and agencies, don't worry.
[1:51] You can assign separate filing frequencies to each of them. Select Next. If you have more than one agency to add, choose Yes. If not, choose No and Next. Finally, click Finish and turn on sales tax. This is where QuickBooks keeps track of the money you've collected from customers on sales where you charged sales tax.
[2:12] The top section always shows how much you owe in the current filing period and how much has been collected so far for the next upcoming filing period. If you forgot to add an agency you collect sales tax for, or if you just need to change something, select Sales Tax Settings. From this screen, you can add tax agencies or edit the tax agencies QuickBooks set up for you earlier.
[2:37] Use this window to update your filing frequency or choose a different Start Date. The Start Date is the date you want QuickBooks to start tracking your sales tax for you. If you've made any changes, Select Save. You can also add a custom sales tax rate if something you collect wasn't automatically set up.
[2:57] Just choose whether it's a single or combined rate, the name of the sales tax, and what agency you collect it for.
Step 1: Learn how QuickBookscalculates sales tax
QuickBooksautomatically calculates the total sales tax rate for each sale based on the following:
Your customer's sales tax exempt status.
Where you sell or where you ship.
Your service or product's sales tax category.
Learn more on how QuickBooks makes each sales tax calculation accurate.
Step 2: Tell QuickBooks where you collect sales tax
QuickBooks Online keeps track of your state's tax laws to accurately calculate sales tax and returns. If you charge sales tax outside of your state, you can also add other tax agencies you pay.
There are two ways to set up where you collect sales tax:
If you just signed up to QuickBooks, set up where you charge sales tax for the first time.
If you still use manual sales tax, check if you can now switch over to the new sales tax system.
Step 3: Add sales tax categories to your products and services
When you're ready, you can assign sales tax categories to anything you sell. This lets QuickBooks know how much sales tax you need to charge based on what exactly you're selling.
Step 4: Double-check your customers' info
The sales tax rates can also change if you ship products or perform services at your customer's address. And some customers are not required to pay sales tax, like churches, schools, or other non-profit organizations.
Make sure you have your customers' correct sales tax status, billing address, and shipping address. Here's how to double-check your customers' info in QuickBooks.
Step 5: Track sales tax from your customers
When you're done setting things up, you can start using the automated sales tax feature. We'll show you how it works and where you'll see it when you create an invoice or receipt for your customer.
Step 6: Check how much you owe and why
Get a detailed look at the sales tax you owe and why you owe it. This helps you make sure everything is accurate before you file and pay your sales tax return.
Step 7: File your sales tax return
QuickBooks Online tracks your payment due dates in one place so you can avoid late returns and extra fees. Once it's time to file, review what you owe to make sure everything is accurate. Then, you can e-file on your tax agency's website or send your return by mail. After you file, you can track your new sales tax payment in QuickBooksto keep your records up to date.
Automatically save for your sales tax liability by using the QuickBooks Checking Smart sales tax envelope.
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