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Sales Tax

How to collect sales tax in the following situation? Client does annual contracts for handyman service. Some services are taxable and some are not. He invoices for the down payments and then splits the remaining balance into 11 monthly payments and invoices monthly. Should we include sales tax in the initial billing for the down payment? Even though the down payment may not cover the entire taxable amount of service? Any insight would be greatly appreciated.

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Best answer 12-12-2018

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Re: Sales Tax


@DK18 wrote:

How to collect sales tax in the following situation? Client does annual contracts for handyman service. Some services are taxable and some are not. He invoices for the down payments and then splits the remaining balance into 11 monthly payments and invoices monthly. Should we include sales tax in the initial billing for the down payment? Even though the down payment may not cover the entire taxable amount of service? Any insight would be greatly appreciated.


This depends on your state sales tax office.

 

IF, if the state requires that you report sales tax on accrual basis (most do) then yes, you are required to collect the full amount of sales tax due for the contract when it is initially written.

 

Call the state sales tax office and find out.

4 Comments
QuickBooks Team

Re: Sales Tax

Hi there, @DK18.

 

I appreciate you providing me the details of your concern. I can share information about collecting sales tax.

 

You will want to include a sales tax in the initial billing for the down payment, since QuickBooks automatically calculates and divides the payment equally into the service items included on the invoice.

 

The following articles below contains more insights about this matter:

This information should help you collect taxes. I'll be on the lookout for your reply and to further assisting you if you have other questions. Wishing you and your business continued success. 

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Re: Sales Tax

Thank you for your response. I will more fully explain my dilemma.  For instance: I have a contract to be collected for a total of $1976.74. The down payment is $326.74 with 11 monthly installments of $150. The taxable portion of the contract is $1515.00 and sales tax is $111.74, the nontaxable services are $350.00.

 

How do I invoice the down payment and the ensuing monthly charges? I am sure I am missing something.

 

 

 

 

Moderator

Re: Sales Tax

Hello there, @DK18.

 

Thank you for the quick response. I'd be happy to help share additional information about collecting sales tax.

 

You can create an invoice using multiple sales tax line items to specify which of the amount is taxable and non- taxable. Additionally, since you're calculating a tax on a certain threshold sales amount, you need to track all the taxable items up to that amount manually.

 

Here's how: 

  1. From the Customers menu, select Create Invoices
  2. Enter first all the taxable items. 
  3. Add taxable code to the right of each item.
  4. Enter the subtotal item after entering all taxable items. 
  5. Enter the nontaxable items, then add non-taxable code to the right.
  6. Click Save & Close.

For the more information and detailed steps, I recommend checking this article: Show multiple sales tax items on an invoice.

 

Also, for invoices that you sent on a regular basis, you can set up recurring invoices. This way, you don’t have to enter your client's payment information repeatedly, and Quickbooks will save the standard items as a template. It also allows you to input the remaining items when you are ready to send out the new invoice.

 

Here's how:

  1. From the Customers menu, select Credit Card Processing Activities
  2. Select Set Up Recurring Payments.

The following article contains additional information about this, as well as video tutorials about recurring payments: Recurring Payments.

 

If you need to reach out for more help, our phone agents will be able to help you get to a resolution quickly.

 

Here's how you can reach them:

  1. Go to https://help.quickbooks.intuit.com/en_US/contact
  2. Select your QuickBooks Desktop version at the top right.
  3. Select a topic.
  4. Click the green Get Phone Number button to see the support number. 

This information should help you collect sales tax to your invoices. Keep me posted on how things work on your end. I'll be happy to help you further. 

Established Community Backer ***

Re: Sales Tax


@DK18 wrote:

How to collect sales tax in the following situation? Client does annual contracts for handyman service. Some services are taxable and some are not. He invoices for the down payments and then splits the remaining balance into 11 monthly payments and invoices monthly. Should we include sales tax in the initial billing for the down payment? Even though the down payment may not cover the entire taxable amount of service? Any insight would be greatly appreciated.


This depends on your state sales tax office.

 

IF, if the state requires that you report sales tax on accrual basis (most do) then yes, you are required to collect the full amount of sales tax due for the contract when it is initially written.

 

Call the state sales tax office and find out.

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