Paying Sales Tax to the State

I used to do that type of transaction with my business. I called it "pass through" taxation, although I don't know if that is the official term. 

I would buy products and pay tax at time of purchase, then sell to my customers at the same price that I paid, including the sales tax. I would then report that I had zero sales to the state, since I wasn't paying tax to them this way. This was all before I was using QBO, but if I had done it within QBO, I would have treated my customers as tax free, since I already paid the tax on their behalf. As you can see, it isn't too kosher to do it this way.

Later in my biz I transitioned to tax-free purchases and then collecting tax from my customers at time of sale. Quickbooks keeps track of these things very easily. At the end of the quarter, I run a report and remit to around 15 different entities. It takes me about 1.5 hours to do all these payments, mostly online, a few on paper that get mailed to the cities. There are QBO vendors that will do this for you, but it is very expensive. If you are lucky to live in an area that doesn't comprise multiple taxing municipalities, you will have it much easier than me. 

on time purchase, you still get a receipt, that is your paperwork to back up the accounting entries.

Statements, unless they show actual puchase details, are summaries and are not supporting documentation for purchases anyway.

Just like a bank or CC statement is not supporting documentation for accounting expense or income entries.

The Texas Comptroller told me to reduce Taxable Sales by the amount of tax we paid ourselves on material.  Since only a select few sales are taxable, it's easy enough for me to track which related purchases we paid tax on.  How do I make this adjustment in QBO?  It doesn't seem to want to reduce  taxable sales.  It will make a credit adjustment to the total owed, but that's not agreeing with the State calculation.  If I use Reason as "credit", which account do I use?  I tried the same "material income" that I assumed QBO used to calculate the original tax on, but that gave me a really weird balance due.  

@RhondaQBUser

I am in Texas too and while I have not asked that question that way, I would not expect that response either.

Short answer is you can not affect taxable sales from the pay sales tax module at all.

This area is a quandary

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.

Thank you.  I appreciate your response.  Do you think I did it wrong when filing with the State by reducing taxable income?  If so, how do you do the credit with the State?

We don't use inventory.  We are an electrical contractor and I code all materials to COGS.  I understand what you said elsewhere about the IRS recognizing the full cost, and not to reduce COGS by the sales tax already paid amount.  So I'm still unsure where to create the account I need to credit.  We only have to charge sales tax on specific jobs, and we rarely have them, so I just need a quick fix.  It's also costing more in my time to fix and adjust it than it's worth, but I've got to somehow get the correct payment entered.

Since QBO doesn't have any way to add the taxing Agencies I need for the various cities jurisdictions, I just manually enter the full 8.25% on the customers invoice.

@RhondaQBUser

Do you have sales tax turned on in QBO? If so do you have the auto sales tax beta test, or do you have the original sales tax (which works)?

You can tell if it is the original by click add/edit sales tax items in the sales tax part, and if you can create sales tax item then you have the orginal.

I have the dumb auto one.

@RhondaQBUser

As I said in another community, this auto sales tax thing is going to get some company in trouble. QBO project managers do not seem to understand they are experimenting with real people and real businesses (with ZERO knowledge of running a business) - and a sales tax audit is going be a mess for those with this auto sales tax SNAFU

Hopefully if that happens to someone, that person has a lawyer or judge in the family and has the guts to sue and not settle with a non disclosure agreement attached. For this situation, with no input from the user, intuit is directly responsible.

Anyway, for the current problem if it was me I would bite the bullet and just pay the sales tax due

Going forward, I would not use banking downloads to make entries for you.
Take the time and set all items in products & services to non taxable, set all customers to non taxable, and try to change the tax setting to no you do not collect sales tax (I do not know if you can do that with auto sales tax)
create a current liability account called my-sales-tax-payable or something
create a service item called sales tax, enter 0.0825 in the rate and select the my-sales-tax payable account as the income account

On the sale, enter your service items with the price you normally charge (not including sales tax
If there is more than one item use a sub-total to get the total amount
then enter that sub total amount in the qty block of the sales tax item

That will post income from your services items, and post the sale tax to the my-sales-tax-payable account

at tax time do a sales income report for the period. If you have plus, you could set the location tag for the zip code and use that to sort sales by jurisdiction assuming you tagged the transactions as they occur, other wise it will have to be kept outside of QBO, spreadsheet maybe? Fill out the sales tax reporting, the tax due should be less than the tax collected if you are filing before the deadline (early payment discount). Make the sale tax payment in QBO, and use the my-sales-tax-payable account as the expense (reason) for the payment.