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Normally when I purchase a product for resale, my vendors do not add tax. I then add my markup and applicable taxes for the resold amount before invoicing the client. I recently purchased a product that I intend to resell but my supplier withheld taxes on the COGS amount. Once I add my markup and figure the taxes on the full sale amount, I need to decrement the taxes due by the amount that I paid my vendor. The only way I can figure to do that is to have two line items on the invoice. The first is the COGS amount with no taxes applied and the second is my markup with tax applied. But then I give my client visibility into my margins. Is there another way to do this without giving the client that visibility?
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The IRS says any amount paid to get an item, including sales tax, shipping, etc or to make it ready for sale is part of item cost - so as far as the IRS is concerned it should be added to item cost and received at a price that includes all costs
States have what is often called a resellers permit, you download it, fill it out, give it to your vendor and then he can sell to you sales tax free for items you sell - that is the easiest way to deal with this in my opinion.
But if you want to track sales tax paid and claim a reduction in sales tax due when you file. When you receive inventory, on the expense tab, select a sales tax paid expense account (you will probably have to create it the first time).
This is the amount you will claim on the sales tax form, and this same amount has to be used to lower sales tax due in the pay sales tax module, using the adjust button.
This amount will not show on the sales tax liability reports though, you will just have to remember to use sales tax adjust.
The IRS says any amount paid to get an item, including sales tax, shipping, etc or to make it ready for sale is part of item cost - so as far as the IRS is concerned it should be added to item cost and received at a price that includes all costs
States have what is often called a resellers permit, you download it, fill it out, give it to your vendor and then he can sell to you sales tax free for items you sell - that is the easiest way to deal with this in my opinion.
But if you want to track sales tax paid and claim a reduction in sales tax due when you file. When you receive inventory, on the expense tab, select a sales tax paid expense account (you will probably have to create it the first time).
This is the amount you will claim on the sales tax form, and this same amount has to be used to lower sales tax due in the pay sales tax module, using the adjust button.
This amount will not show on the sales tax liability reports though, you will just have to remember to use sales tax adjust.
Your question is not clear.
"The IRS says any amount paid to get an item, including sales tax, shipping, etc or to make it ready for sale is part of item cost - so as far as the IRS is concerned it should be added to item cost and received at a price that includes all costs"
Just to clarify, how should you enter the Vendor invoice for this transaction.
How are the tax and shipping costs recorded in the COA in this transaction?
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