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Senior Explorer ***

Refunding Sales Tax Overpayment via Avalara

Hi,

 

I recently created a sales receipt for a credit card purchase through QuickBooks Online.  I use Avalara Sales Tax Solutions to calculate sales tax on invoices and sales receipts.  I discovered that last week Avalara incorrectly overcharged sales tax by $10.88 on the sales receipt.  

 

I'd like to be able to refund the customer the $10.88 sales tax overpayment, but I'm not quite sure how to handle that in QuickBooks Online.  Since I calculate sales tax via Avalara, I don't think QuickBooks will let me do a sales tax adjustment.  I'm not sure how I'd do a refund when the money is currently in my sales tax liability account.

 

Would it be easiest to do a full refund and then create another sales receipt?

 

Thank you!

3 Comments
QuickBooks Team

Re: Refunding Sales Tax Overpayment via Avalara

Hello there, @R_Crane.

 

Let me help share information on how to record a sales tax refund in QuickBooks Online (QBO).

 

In QBO, you can record the refund as a deposit to the liability account used when paying the taxes. You can also edit the invoice or sales receipt if the invoice hasn't been paid yet. If it was paid already, you have to refund the customer for the sales tax that was charged.

 

  1. Log in to your QBO account.
  2. Go to the Plus (+) icon.
  3. Select Refund Receipt.
  4. Select the same customer that needs to be refunded, then the bank account from which the refund will come from.
  5. Select the same taxed Product/Service item as the original invoice or sales receipt.
  6. Enter the same information on the next line but this time, enter a negative amount/quantity and uncheck the Tax box.

For the detailed steps, you can check this article: Refund sales tax.

 

I'm also attaching this article for further details about sales tax in QBO: Sales tax in QuickBooks Online.

 

Keep in touch if you have any other sales tax questions, I'm just a few clicks away to help. Wishing you the best!

Senior Explorer ***

Re: Refunding Sales Tax Overpayment via Avalara

Hi,

 

Thank you for your help.  While this info is very helpful, I may have forgotten to mention that I am looking to do a partial refund of sales tax.  QBO calculated sales tax incorrectly on the Sales Receipt as $14.16, instead of $3.28 which is the correct amount.  I'd like to reimburse the customer $10.88 if possible.  Upon opening a Refund Receipt, I noticed that I can only select an income account to refund the customer and not a liability account.  The overpayment of sales tax is currently in a sales tax liability account.  

 

Would I need to refund the customer from an income account and then create a journal entry to move the funds from the sales tax liability account back to the income account I used to refund the customer?

 

Thank you!

QuickBooks Team

Re: Refunding Sales Tax Overpayment via Avalara

We can adjust the sales tax you owe, R_Crane.

 

We need to set up an account for a sales tax adjustment. It can either be an expense or income type. Then, follow these steps on how to adjust it. 

  1. Click Taxes and then Sales Tax
  2. Find the tax period, and select View return
  3. Click Add an adjustment
  4. Select the reasonincome account in the Account field for adjusting the sales tax. It decreases the tax due. 
  5. Enter the adjustment amount, and then click Add

Afterwards, let's reimburse your customer via the Refund Receipt. Yes, you need to use the income account to offset the amount your customer paid. With that, you don't need to create a journal entry.

 

You can check out this article for your reference on how to manage sales tax payments

 

 If you need more help, please let me know. 

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