Customer Taxable status

Has this been resolved?  We are having the same issue.  We have customers marked as tax exempt in their profile but still show a taxable amount in the Customer Sales Detail report and others.  This is throwing off our sales tax filings.

The investigation is still in progress, josmith. Our engineers gave an update about the tax exempt status. 

If a customer is listed as tax exempt and has a valid address, the tax exempt status won't apply to any invoices or sales receipts created for them.

You can check their address to verify. Also, when creating a sales transaction to these customers you can uncheck the taxable box under the TAX column. This way, taxes won't be calculated.

For further updates, I suggest reaching out to our Phone Support Team so you'll receive email notifications once fix is available. Please follow the steps provided above on how to connect with us. 

If have further questions with your sales tax setup, please let me know. I'm around to help!

Hi

When do you plan on getting this fixed?  Sales Tax filing is serious stuff that can get businesses into quite a bit of trouble if not done correctly.

Please elevate the fix as not correcting after 5 months is not acceptable.

Jim

I'm unable to tell as to when this will be fixed, Jim.

As soon as our engineers has a fix for this concern, we will update you by sending an email associated to your account. For you to receive the email, we'll need your company details. Here's how:

1. Click the ? Help icon, and then Contact Us.
2. Enter Customer taxable status as a keyword.
3. Click Let's talk.
4. Select how you'll want to contact us either Start Messaging or Get a callback.

In the meantime, you can follow the workaround shared by Catherine_B.

We appreciate your patience while we're working to resolve this issue.

My tax exempt customers are checked as Non Tax and their address is correct.  However, they are still getting taxed when an invoice is created with QBO utilizing the app.  This is a huge problem not only for the customer but I have to pay Merchant Services for both the initial incorrect charge and again for the refund.  Issue has been known by QB for over a year?

Good day, Jlf656.

I'm joining this thread so I can share more details about this issue.

I understand the impact of this behavior on your transactions. Though we have an investigation, there's a way so we can avoid the tax being calculated. When you create a transaction, you can simply remove the checkmarks under the Tax column. That way, QuickBooks won't calculate the taxes. 

Also, you'll want to check these articles on to learn more about sales tax:

• Learn how QuickBooks Online calculates sales tax

• Refund sales tax

I'm just a post away if you need more help from me. Keep safe!

We are having this problem as well, and while removing the checkmarks in the tax column in an order is a simple solution, it does not fix a problem that we are having with our orders coming in from our website via BigCommerce and OneSaas. I have an order that absolutely will not drop in, and after working through it with OneSaas, we believe the problem to be with QBO and the tax settings. The product and customer is not taxable on our website, but it is saying the customer is in QBO and therefore the order won't sync. 

Why is this problem not being corrected with a serious solution? 

Hi there, @jnmatz.

Let me sort things out for you. As I've checked it here, the product investigation (INV-15454) about the error "Customers" are being charged tax, even when designated as "Tax Exempt" is already closed.

When a customer is marked Tax Exempt it doesn't always mean they are exempt from all tax implications. To be eligible, the product/service has to be a product that also corresponds to being tax-exempt in the jurisdiction of the exemption. To resolve this, you can go edit the product/service and ensure it is set up correctly with an appropriate tax mapping that would make it eligible to be tax-exempt. 

Here's how:

1. At the left navigation pane, select Sales.
2. Click the Customers.
3. Choose the customer you want to be tax-exempt.
4. Click on Customer Details, then select Edit.
5. Select the Tax info button, then put a checkmark beside This customer is tax-exempt, and select a Reason for exemption.
6. Click the Save button.

Furthermore, you can also check these articles to guide you about sales tax in QuickBooks Online:

• Set up and use automated sales tax in QuickBooks Online.
• Set up your sales tax.

Please fill me in if you have additional queries. I'd be glad to help. Stay safe.

That definitely doesn't work.  I have a customer marked as non-taxable in Maryland.  Which means no sales tax at all here.  It is still showing up with taxes on invoices.  This is a MAJOR problem.  Please elevate this fix to the top of your list.  It is ridiculous that this hasn't been fixed correctly in over a year.

Hi there katiehanna. I have to ask, does your customer have an address listed? I've noticed an error that sometimes causes a non-taxable customer to taxed if their address isn't listed in the customer profile. I also recommend checking the product and services listed on the invoice.

Sometimes the tax category set for them can cause issues with tax being produced unnecessarily as well. To do so, just follow these quick steps:

1. Select Sales and then Products and Services
2. Locate the products being sold to the customer and select Edit to the right 
3. Once the window appears, double-check the Sales Tax Category 

Sometimes, what can occur is a special category may be set. This will override other settings for you and continue to tax items. Let me know if this helps, or if you need anything else just leave a reply below so I can get back with you. 

You can also reach out to our phone support team, they can handle sensitive information and will be able to access your account and get to the bottom of it for you. Have a great day. 

The address for the customer was incorrect.  I corrected it and it does seem to be not including tax.  Thank you.

I double checked my products and they are marked as "Taxable - standard rate", and my tax exempt customers are still being taxed - one is a customer that we have had for over 4 years and invoiced hundreds of times without tax. We did not have this problem until the sales tax update a couple of months ago.

I'm here to help ensure your customer is not being taxed in QuickBooks Online, CoriWGG.

Even if the customer is exempt and the item is taxable, QuickBooks will automatically mark the invoice as taxable.  You need to manually uncheck the Tax box before saving the transaction. See the attached screenshots below for your visual guide.

The system calculates taxes based on the following:

• Your customer’s tax exempt status
• Where you sell and where you ship
• Your service or product’s tax category

Aside from that, make sure you have your customers’ correct tax status, billing address, and shipping address. And, you need to map items to their proper tax categories. 

Check out the Learn how QuickBooks Online calculates sales tax page for more details. Then, go to Why does QuickBooks sometimes calculate sales tax for my tax-exempt customer? section.

Let me know if there's anything else you need, and I'm always right here to help CoriWGG.

I have been billing this customer for 4 years with them set up as tax exempt and QuickBooks has not applied tax to them. Nothing in the customer or product setup has changed. The shipping & billing addresses are all correct and the status is set as tax exempt. The products are all set up as standard rate. Nothing has physically changed in our set up - yet over the last 2 months QuickBooks has started ignoring any tax exemptions.

Thanks for getting back to me, CoriWGG.

Let's perform one more troubleshooting step to isolate this issue. Is the shipping address different from the billing address?

If so, you can try making the shipping address the same as the billing. Then, create an invoice.

If the system still calculates the tax, I recommend contacting our QuickBooks Online Team. They can send this issue again to our Product Team for escalation.

Stay in touch on how this goes by commenting below. I'm always around whenever you need anything else.

Has there been a fix for this issue?  We are having the same problem with correctly set up tax exempt clients defaulting to being charged tax on invoices.

I can share additional information about how to resolve those tax-exempt customers who are still being charged, @MPro.

The investigation about customers being charged tax, even when marked as Tax Exempt, is already closed and resolved. We have identified that when a customer is marked as Tax Exempt it doesn't always mean they are exempt from all tax implications.

To be eligible as tax-exempt then the product/service has to be a product that also corresponds to being one in the jurisdiction of the exemption.

You can also check on the following items to make sure that your customers will be fully tax-exempt:

• The product/service is set up correctly with an appropriate tax mapping that would make it eligible to be tax-exempt.
• Verify if the customer has a valid address. A missing or an invalid one will let QBO use a default tax rate for the company.

Here's how to update the tax mapping:

1. Go to the Gear icon and select Products and Services.
2. Find the item then select Edit.
3. Select the Sales tax category dropdown menu and choose Nontaxable or the specific sales tax category that fits your item.
4. Click on Save once you're done. 

To update customer information:

1. Go to the Sales menu and choose Customers.
2. Choose the customer you need to update the information of.
3. Select Edit.

You can check these articles for more information:

• Add sales tax categories to your products and services
• Edit customer information

I'm always here if you have questions about your customers and or anything else. Let me know in the Reply section below. Take care and have a wonderful day!

That's not really helpful because what I'm talking about is a client that is a non-profit and therefore non-taxable.  They are getting the same services as all the other clients, there is just no tax for them.  I have marked them as non-taxable for church or non-profit or whatever, but that doesn't seem to help.  It just charges them tax until I click "see the math" and then it's like "oops just kidding they're non-taxable".

If this is accurate, it sounds as though marking a customer as tax-exempt does nothing. Are you really saying that the system will ignore the tax-exempt status of the customer if I am selling them an item that I also sell to my taxed customers? What is the purpose of marking a customer as tax-exempt if the system will still be making its tax decisions based on the items being sold? Just for our own records? I can't expect my employees to remember who is tax exempt every time they process an invoice.

Yes, checking the box that says a customer is not taxable does not do anything.  I worked through this with a support person and the only way to get it to work properly is to make sure your default tax rate is blank before you check the not taxable box.  If your regular sales tax is selected before you check the box, then your invoices will default to the sales tax rate, even though the box is checked. 

I'm not very satisfied with this workaround.  It's fine for new customers, I suppose, but I still have to go in and check existing customers when I create invoices.  And if I copy an existing invoice that has the incorrect tax information attached, the tax status will carry over on the new invoice as well.  It's a nightmare.

Thank you, thank you, thank you !!  This is the first response that is actually helpful.  I agree with everyone else, why mark a customer as "non-taxable" if the system will add tax anyway, or if we have to set up all kinds of extra products/services or try to have all our employees remember who is taxable and who is not.  

The solution is to be sure that the "Default Tax Code" box is empty (no default tax code appears) and that the taxable box is not checked.  I couldn't figure out why some non-taxable customers had the tax added and some not, this was the answer, I went back into the customer information and made sure the Default Tax Code box is blank, and it works !!

Same issue here except my sales tax rate defaults to "Based on Location". It won't let me choose a blank. Anyone know how to do this?

Help has arrived, @MJHINVD.

Allow me to share information about sales tax in QuickBooks Online (QBO).

When you use Automated Sales Tax feature, the sales tax amount is calculated based on the state where you have nexus and are registered to collect sales tax. QBO USA uses this feature so the Based on Location tax rate will always be applied. 

For the time being, while establishing sales transactions, we have to manually select the custom rate from the drop-down menu.

In addition, you may consider deactivating the State tax from the Sales Tax Center if you don't want this to calculate based on location.

Here's how:

1. Go to Taxes tab and select Sales Tax menu.
2. Proceed to Sales tax settings.
3. Click the Edit drop-down of the tax agency and choose Make Inactive.

For your visual reference, I've attached some screenshots below:

You can check this article to learn more on how to set up and use custom tax rates in QuickBooks Online.

Drop me a reply below if you have any other questions about sales tax rate. I'll be happy to help you out.