cancel
Showing results for 
Search instead for 
Did you mean: 
kanders2112
Level 1

How to categorize a sales tax refund from the state

When I took over the bookkeeping for our small business, I realized that we had over-payed on several quarterly sales tax returns with the state. I amended the returns and the state sent us a check for the amount. Now that it has been deposited to the business account, I do not know how to categorize the item in QBO. Do I need to match it to something? Make a journal entry?

Anybody? Anybody?

3 Comments 3
Business Quarterback
Level 2

How to categorize a sales tax refund from the state

You need to trace the transaction backwards.  How did you overpay the Sales Tax?  Did you collect more than you needed to from customers?  If so, then you have a liability to refund their overpayments and you would post the refund from the state to a Liability account.

 

If the amount collected from customers is correct, then where did the original payment of the sales tax get recorded?  If your predecessor simply paid more than was owed, then the balance in your Sales Tax Liability account is probably too low and you need to apply the refund from the state there.  

 

Or was it a Use Tax payment, which would have been recorded as an expense?  Then you would post the refund from the state to whatever account(s) hold the overcharge on the expenses.

 

Hope this helps!

bvill23
Level 1

How to categorize a sales tax refund from the state

I HAVE A CHECK THAT THEY SENT FOR ESTIMATED 2023 SALES TAX WE PAID EARLY.

I NEED TO DEPOSIT THE CHECK INTO OR CHECKING ACCOUNT, BUT WHERE I RECEIVE CHECKS 

IS ONLY CUSTOMERS IN AP. HOW DO I APPLY THIS CHECK SO IT SHOWS UP IN MY DEPOSIT AND IS UNDER SAME CODE AS DISTRIBUTED.

jenop2
QuickBooks Team

How to categorize a sales tax refund from the state

It's good to see you here in the Community, bvill23. I'm here to help with your inquiry about managing refunds for early tax payments.

 

You can record it as a deposit and put it in your checking account. Allow me to share these steps with you:

 

  1. Click the + New button and select Bank deposit.
  2. Select the checking account in the Account field.
  3. Proceed to the Received from column and select the state agency.
  4. Choose the right account orselect State estimated taxes under the Account column. You can also reach out to your account for additional advice just in case you're not sure what account to use.
  5. Type in the amount and any other details.
  6. Click Save and close

 

Here's an article that provides more details about recording vendor refunds: Enter Vendor Credits And Refunds In QuickBooks Online.

 

I'd also like to share these articles about vendor balances and estimated taxes for additional reference: 

 

 

Don't hesitate to reply to me or drop by the Community again if you need more help with your taxes, recording vendor-related transactions, and bank deposits. The QuickBooks Team is always ready to offer guidance and support.

 

Sign in for expert help
Ask questions, post replies & join our community of QuickBooks users.

Need to get in touch?

Contact us