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JKCEnt
Level 2

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

I have searched and can't find anyone discussing this. I noticed when I ran the cash sales tax liability report that I showed invoices that had been paid during the period from an odd city for that time of year. When I clicked to see what invoices were included in that amount, it showed an invoice from 2 years ago that was partially paid at that same time. I finally figured out that in December of 2019, I wrote off the rest of the invoice through the receive payments window and the amount I wrote off is what is appearing saying I owe tax on that amount.  I realize that I can simply make an adjustment for the tax amount but that is not my concern. I don't want other written off amounts showing because I never would have noticed this, had I not questioned that city showing up now. There are other invoices that were written off, so I am sure they are showing as well in our most used city, but that would be alot of invoices to look through. I must have a setting wrong but if so, I can not find it. I have my sales tax method set to cash. However we were switched to the cash method byt the state 2 years ago and were using the accrual method prior to that.

Solved
Best answer February 22, 2020

Best Answers
Joesem M
QuickBooks Team

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

Hello there, @JKCEnt.

 

Let me provide additional information about your cash sales liability report.

 

You'll have to create a Bad Debt (Service item) to reduce the unpaid portion of the sales.

 

Here's how:

 

  1. Go to the Lists menu and select Item List
  2. Select the Item button and click New.
  3. Choose Service Type.
  4. In the Item Name/Number enter Bad Debt.
  5. Put the Expense account then click OK.

 

Once done, we can create a Credit Memo to put the unpaid portion to the Expense account to record a negative sales tax.

 

To create a credit memo, here's how:

 

  1. Click Customers menu, then select Create Credit Memos/Refunds.
  2. From the Customer: Job drop-down, select your customer.
  3. Enter the items you're giving credit for.
  4. Hit Save and Close.

 

For more details, click this article: Give your customer a credit or refund in QuickBooks Desktop for Window.

 

Also, I'd suggest contacting a tax expert to ensure the compliance of the sales tax records.

 

You can visit our website, it provides articles on how to manage your account in QuickBooks.

 

Please stay in touch if you have any other sales tax concerns, I'll be right here to help you. Take care.

 

 

View solution in original post

12 Comments 12
JonpriL
Moderator

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.

JKCEnt
Level 2

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

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.

 

 

JonpriL
Moderator

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

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.

JKCEnt
Level 2

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

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

JKCEnt
Level 2

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

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.

JKCEnt
Level 2

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

see the period I'm quickzooming on And see that its cash basis here's the quick zoom see it shows paid in Aug 2018, that is the part the customer paid and when it was paid. The 'payment' on the right of 188.10 is the written off amount This is how I had written off the amount.

Joesem M
QuickBooks Team

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

Hello there, @JKCEnt.

 

Let me provide additional information about your cash sales liability report.

 

You'll have to create a Bad Debt (Service item) to reduce the unpaid portion of the sales.

 

Here's how:

 

  1. Go to the Lists menu and select Item List
  2. Select the Item button and click New.
  3. Choose Service Type.
  4. In the Item Name/Number enter Bad Debt.
  5. Put the Expense account then click OK.

 

Once done, we can create a Credit Memo to put the unpaid portion to the Expense account to record a negative sales tax.

 

To create a credit memo, here's how:

 

  1. Click Customers menu, then select Create Credit Memos/Refunds.
  2. From the Customer: Job drop-down, select your customer.
  3. Enter the items you're giving credit for.
  4. Hit Save and Close.

 

For more details, click this article: Give your customer a credit or refund in QuickBooks Desktop for Window.

 

Also, I'd suggest contacting a tax expert to ensure the compliance of the sales tax records.

 

You can visit our website, it provides articles on how to manage your account in QuickBooks.

 

Please stay in touch if you have any other sales tax concerns, I'll be right here to help you. Take care.

 

 

View solution in original post

JKCEnt
Level 2

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

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.

 

 

jcmrep
Level 1

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

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!

TBSParkin2011
Level 1

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

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.

DebSheenD
QuickBooks Team

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

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.

TBSParkin2011
Level 1

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

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.

 

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