Payment discounts not hitting sales tax liability report

AmberCabinets · ‎March 04, 2021

Hello,

I have found that when we apply a discount to a payment based on terms such as 2% net 10/net 30, the discounted amount is not reflected on the sales tax liability report. I can see it reflected on my P&L for that same day. If we apply a discount to an invoice it is reflected on the sales tax liability report, is there anyway to have the payment discount reflected as well?

We use QB Desktop 2020 and cash basis accounting.

Thank you in advance for your help!

BigRedConsulting · ‎March 04, 2021

When used on an invoice, it depends if the discount is taxable or not. If taxable, it will reduce taxable sales and tax. Otherwise it won't.

There is no way to reduce taxable sales or tax after the fact when adding an early payment discount while receiving a payment.

I suspect that such discounts are not considered taxable, since you're rewarding your customer for an early payment on account, and not selling the taxable things for less - you didn't reduce the price of the items on the invoice.

View solution in original post

Rasa-LilaM · ‎March 04, 2021

Thanks for visiting the Community, AmberCabinets.

The Sales Tax Liability Report is a summary of the sales tax you've collected and currently owe to your tax agencies. The option to add the Discount line item on the report is currently unavailable. You’ll have to open the invoice to view the discounted amount.

Open the Sales Tax Liability Report, double-click on the amount for the tax agency.
On the Sales Tax Revenue page, choose the invoice you wish to open and click on it to view more details.

For future reference, this article contains resources that will guide you on how to handle sales taxes in QuickBooks. It includes some links to help you accomplish your sales tax-related tasks: Set up sales tax.

Feel free to visit the Community if you have other concerns or questions about QuickBooks. I’ll be glad to lend a helping hand. Enjoy the rest of the day.

AmberCabinets · ‎March 04, 2021

Thank you for the response. This is not a discount on the invoice, it's when you do the following:

Receive Payments

Discounts and Credits

Then apply the discount as applicable for the net terms. For example, our contractors get 4% off if they pay within 10 days, so during that time I would hit the discounts and credit button then apply the discount.

It's this discount that doesn't reflect on our sales tax liability so I have to pay sales tax on revenue I haven't received.

Thanks!

MirriamM · ‎March 04, 2021

Hello again, AmberCabinets.

Thanks for getting back and providing additional information.

In QuickBooks Desktop (QBDT), taxes are calculated based on the invoices. This is the reason why the discount will not appear on the payment since it's already been taken out on the invoice. For the discount to be taxable, you may need to enter it on the invoice and not on the payment.

In case you'd want to customize your report, see this article for a guide: Customize reports in QuickBooks Desktop.

You may also find this resource helpful in the future: Sales Tax Liability Report: Total sales is different from total income.

If you have any other questions, feel free to reach back out. Have a great day.

BigRedConsulting · ‎March 04, 2021

When used on an invoice, it depends if the discount is taxable or not. If taxable, it will reduce taxable sales and tax. Otherwise it won't.

There is no way to reduce taxable sales or tax after the fact when adding an early payment discount while receiving a payment.

I suspect that such discounts are not considered taxable, since you're rewarding your customer for an early payment on account, and not selling the taxable things for less - you didn't reduce the price of the items on the invoice.

AmberCabinets · ‎March 05, 2021

Thank you.

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Payment discounts not hitting sales tax liability report