Why does the cash sales tax liability report include the amount written off of an invoice?

Hello @JKCEnt,

Your Sales Tax Liability report on a Cash basis will always show your sales transaction recorded on the same report period you've run. You can read this article to understand more about your report: Review sales tax reports.

You're right, creating an adjustment will fix the amount you owe indicated on the Pay Sales Tax window. Here's an article you can read to learn more about sales tax adjustment: Process sales tax adjustment.

You can also read this helpful article in case you need some related articles in managing your sales taxes: Sales Tax in QuickBooks Desktop.

Let me know in the comments below if you have any other questions. Always around ready to help.

Thanks for your response, but that does not help.

How do I make sure the written off amount is not being treated like income received and therefor taxable at the time of the write off? I don't want to pay tax on money I didn't receive! Also no tax was actually collected and its saying there was. It seems there is something going on in the background in Quickbooks that is not right. In my investigations, I did locate an inactive account called 'Discounts' which I think is incorrectly labeled as an Income account. Running a quick report does not show this invoice, however. The only account I see being used in this invoices transactions are the expense account 'Write-offs' and accounts receivable. But even though the payment amount is 0, the recent payments listed in the customer profile showed the discounted amount that we are discussing.

I'm guessing that's where the problem lies. It's not actually a payment.

Hello @JKCEnt,

Writing off payment from your customer isn't subject to sales tax reporting. In Cash basis, your sales transaction is subject to sales tax reporting base on the date it was paid.

Here's an article you can read to learn more about writing off payment from your customer sales transaction: How do I?

You can always leave a comment below if you have any other questions.

Exactly, that's why what's happening is wrong.

How do I talk to tech support? You just keep sending me to links telling me how to do something I just explained to you I did. IE:  I said I wrote the extra amount off in the receiveed payments window. I think that would imply I know how to do it. 

Please, tell me why a discount entered that way is showing tax collected and due on my current sales tax liablility when the original date of the actual part the customer paid(250 of a 400invoice) is in August of 2018.

Sales tax was paid on that amount at that time.

Well I already told you why it and what is showing up now. The discounted amount of $150 is showing up because I wrote it off in Dec 2019. That amount of tax it says has been collected and is payable now is being calculated on the discount. That should not be there.

Telling me it shouldn't be there doesn't help when I am asking why it's there implying its not supposed to be.

Thank you, I will accept that as a solution, but I am not happy about it. As you can see from this long conversation, it isn't how Intuit tells people to write off an invoice. Most people don't know that they also need to ask if will affect their sales tax due correctly. This should happen automatically since the income was not received. I wonder how many people have been paying sales tax on invoices they thought they wrote off for years.

Also when Quickbooks so nicely asks us when we enter an actual partial payment if we want to write off the extra, what happens then? I have yet to explore whether that happens correctly. Right now I have to go back and change every transaction I did the way you tell us to do for 2019, I'll just have to eat anything older than that.

Thanks for at least finding the solution and being available on the weekend.

I know your post is old and marked as "solved", but I just wanted to let you know that someone understands the issue and agrees with you!  I am having a similar issue.  I am seeing Credit Memos showing up on the Sales Tax Liability Report as negative values; if I zoom on a transaction, it shows the Original Amount & Paid Amount as both negative.  This has the effect of lowering the "sales" amount (we also do sales tax on a cash basis).  These are generally for invoices that we have "voided".  Our situation is complicated a little further as all invoice transactions are "imported" into QB from our primary job management software; this means we can't follow the steps QB outlines in these situations.  Regardless, I agree that the report is wrong.  If you are reporting sales tax on a cash basis, the original (unpaid) invoice never appears on the report; therefore the credit memo to write it off shouldn't appear either.  The same applies for a partially paid invoice as in your case.  We are fortunate that nearly all of our sales are tax exempt; we do have to report non-taxable sales, but at least it (mostly) doesn't affect actual tax we have to pay.  Just thought you'd like to know that someone does understand what you're trying to say!

QuickBooks figures tax amounts differently than our Estimating Software.  This results in a penny to a two penny overage on the amount the customer owes in QuickBooks.  Since the customer pays from the Invoice created from the Estimating Software I have to create an Invoice in QuickBooks to match the Estimating Software so that my receivables will be correct.  I have been discounting this off to customer underpayments.  I noticed today that this discount is appearing on my sales tax liability report as a payment.  I didn't receive the money so it shouldn't be taxable.  The same issue arises when writing off bad debts, which should not be considered income on the tax reports.  I found the solution listed here on the community.  It is quite laborious for a one to two penny difference that occurs on at least 75 percent of our Invoices.  Is there a simpler fix for this?  Since I am not the only one dealing with this issue, would QuickBooks devise a fix that won't affect our tax reports?  It seems like you could make a change to the discount item to make it non taxable income or create an item that was for writing things off that were not collected that was not adding the discount amount as taxable income.  Thank you for your time and attention.  We love QuickBooks and are thankful to have such a user friendly bookkeeping software available.

Hello, TBSParkin2011.

I can understand you want to have a simple fix to your concern. However, as mention by my peer, you'll need to create a  bad debt and then create a Credit Memo to put the unpaid portion to the Expense account to record a negative sales tax.

I've added this article for additional information in creating a credit memo: Give your customer a credit or refund in QuickBooks Desktop for Windows.

For future reference, read through this article to learn more about how to record an invoice payment.

Don't hesitate to leave your questions or clarifications about the sales tax liability report. I'll get back to you as soon as I can.

Thank you for taking the time to respond.  I appreciate you.  I understand that the process has to be done.  I was hoping QuickBooks could create a button or something that I could select for it to be done from the Invoice, kind of like the write of additional amount choice.  We are a small company but we did nearly 10,000 Invoices last year.  At least 75% of those needed one to two pennies written off.  I guess instead of looking for a simpler method I should have been making a product suggestion.  I am sorry for wording it wrong.  Could you pass on the product suggestion or should I copy and paste all of this on the suggestion form?  Thank you for being willing to help.

Hello,

I am another user that has complaints regarding the say quickbooks reports taxable sales on the Sales Tax Liability report. There are materials included on the invoice to a customer that are taxed, but if I also have returned materials and include those negative materials amounts on the customer's invoice it messes up the Sales Tax Liabilty amount. It includes that as being paid by the customer even though it was not yet paid (also cash basis). There has to be a way that quickbooks only shows the paid invoices in this report only, nothing to do with credits applied or included on invoices. None of the solutions in this thread correct that kind of issue, but it's pretty much along the same lines. I'm really hoping for a better solution to this.

Thanks

Thanks for joining the thread, sbanning.

The idea to include the returned material as a negative amount on the invoice will reduce the invoice total. Doing this won't reduce your Sales Tax Liability amount.

Create a credit memo and apply it to the invoice to fix this. As a result, your sales tax liability will be decrease. Then a negative sales tax will be recorded. I'll show you how.

1. Go to the Customers menu, select Create Credit Memos/Refunds.
2. Locate the customer from the Customer: Job dropdown.
3. Include all relevant information, including the returned item.
4. Once done, hit Save & Close.
5. The Available Credit window will pop, then choose the box for Apply to an invoice.
6. Click OK, then select the invoice you want to apply the credit memo.
7. Select Done.

The invoice's overall amount will discrease and ensures your customer will only be required to pay for the materials they have that are taxed.

For your reference, you can read this article for more insights: Give your customer a credit or refund in QuickBooks Desktop for Windows.

I've also included this resource to help you if you need to adjust your sales tax for future use: Process sales tax adjustment.

If you need further assistance with sales taxes, let us know. We're available to help you at any time.

I don't think that's possible, at least cleanly. When we have a credit from a vendor and enter it, it is linked to the customer/job. As far as I understand it, there is not way to add job items to a credit, that can only be done on a customer invoice. There is not option to "add items" to a credit from unbilled job cost items. Furthermore, you missed the question that is the main issue: when a credit is applied from any format, QB's looks at it as if it's a payment from the customer and includes it on the Cash basis sales tax liability detail. The below screenshot is a clear example. That credit for taxable sales is due to a credit to a customer. The customer has not paid the invoice yet, therefore why is it included on the cash basis report? I've asked this so many times, on tech support, they have no idea, they've requested it to the engineers, not sure why it's still wrong after all this time.

Thank you for getting back to us on the Community page, @sbanning. I understand the urgency of resolving this concern. I'm here to add some information about the Sales tax liability report on a cash basis.

Regarding the credit that was included on your report is ideally how QuickBooks works with credits being applied to sales transactions. So once you applied the credit to an invoice it will automatically mark it as paid. This is also a possible reason why it shows on your Sales tax liability report on a cash basis.

Moreover, with regard to the negative amount showing on your taxable sales column. This is caused by non-taxable sales being more than the total sales. This is possible when the transactions have discount lines (which are negative amounts) that are not taxable. You can refer to your accountant to correct the total of your sales tax or you may reach out again to our Technical support team. That way, they can check into your account in a secure manner and will investigate further about the issue.

I've added the following article for more information about the Sales Tax Liability Report:
 

• Sales Tax Liability Report: Total sales are different from total income
• How to fix common issues when running a Sales Tax Liability report
   

Feel free to post a reply if you need more help managing your sales tax transactions or sales tax reports. I'll get back to you as soon as possible. Take care!