When to use custom rates for sales tax

We highly recommend using automated sales tax calculations in QuickBooks Online whenever you create invoices, recurring payments, or sales receipts.  This is because QuickBooks knows the tax rules, no matter where you run your business, which saves you time from manual tracking. When a tax rate changes, QuickBooks will automatically calculate the new rate. 

However, in some special cases, you may need to create a custom rate. For example:

• QuickBooks doesn’t have the special rate you need, such as meals, lodging, or excise tax rates. 
• Your business sells to other countries and you want to track those sales in QuickBooks.
• If you do business in a state that lets you charge a single flat rate instead of the exact tax rate at your ship-to location for items you ship to that state. 

If any of these situations apply to you, add a custom rate. 

Set up custom tax rates

You’re in charge of setting up the correct state or local rate for the type of tax you need to track. If you’re not sure about the correct rates, check your tax authority’s website, or ask your accountant.

Add a single or combined custom rate

When to use a combined rate

Add a combined rate to group individual tax rates that you charge at the same time. This way, you’ll only need to select the one combined rate when you add a new sale. When you look at your report later, each rate is still tracked separately. It’s easy to know how much to pay each tax agency.

1. Go to All apps , then Sales Tax, then Sales tax settings (Take me there).
2. Select the Add agency dropdown, then Add custom rate.
3. Select Single or Combined.
4. 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.
5. Select the Agency you file payments to. If adding a combined rate, select the agency for each rate you need to group as one custom rate.
6. Enter the rate, then Save.

Use custom tax rates when you make a sale

After setting up your custom rates, here’s how to use them on your next invoice or sales receipt.

1. Create an invoice or sales receipt. Then, go to step 2 before you save your transaction.
2. In the Select sales tax rate section, select Custom rates in the  dropdown. 
3. Select your custom rate from the list. If you need a new custom rate, select + Add rate.
   Note: You can only use one custom rate on a transaction. If you need to charge multiple tax rates, set up a combined rate first.
4. Make sure the total tax amount is correct.
5. Select Save, or Save and send to email your customer their invoice or receipt.

Edit or remove a custom sales tax rate

• Edit a rate: if you edit a custom rate that’s been used in a sales transaction, QuickBooks automatically makes the old rate inactive and creates a new one.
• Remove a rate: 
  1. Go to All apps , then Sales Tax, then Sales tax settings (Take me there).
  2. Find the rate you want to remove.
  3. From the Action dropdown, select Make inactive.

Note: You can’t reactivate a custom sales tax rate. Create a new custom sales tax rate with a unique name if you need it again.

Next steps

To track your tax obligations, you can run the Sales Tax Liability report at any time to review what you owe.