Hi there, ChallengingDesigns.
You've probably click on the option to switch to Automated Sales Tax. I can provide you the steps on how to revert it.
That's it! Here's an article that you can use in the future: Sales tax in QuickBooks Online.
Please fill me in if you have other concerns about sales tax.
I am a Texas business. We are located outside of the city limits, so we should not collect the city sales tax portion of 2%. We are only required to collect the state rate of 6.25%. Because our business has a city address (post office), then QBO assumes that we use the combined 8.25% rate. Every time we have a taxable sale, we have to override the sales tax. Furthermore, if we make any changes to the invoice, it makes us override the sales tax again. If we set up a recurring transaction, it requires an override. If we make any changes at all to the recurring transaction, we have to remember to override again. It's not working to assume that because our business has a city address, that we are located within the city and should collect the city rate. It just doesn't work that way in Texas. We need a setting to permanently override the sales tax rate for our location, which happens to be outside of the city limits. We try to catch most of them, but it's impossible and cumbersome.
I understand that you're only required to collect the state rate of 6.25%. As mentioned in this thread, sales tax are based on the address on where you do the work which also collects the city rate of 2% automatically.
What we can consider right now is to manually override the sales tax amount on each transaction. For your reference, you can read this article for the detailed steps and information: Override Sales Tax on Transactions.
Also, I can see how important to have a setting that can permanently override the sales tax rate for your location. I want to let you know that your voice matters and I'm submitting your feedback directly to our engineers.
For now, you can visit our blog site so you'll be able to get the latest news about QuickBooks and what our Product Care Team is working on.
Please feel free to post any other questions you have below. The Community and I are always here to help you out.
If sales tax is being calculated based on location, it is calculating the incorrect location amount. I've attached a screen shot of what the breakdown should be that I got from the Tx Comp Page (https://mycpa.cpa.state.tx.us/atj/). It should be calculating 8.25 but is only calculating 7.25. Since this is a newer acct, it's not allowing me to switch back to the old version.
There should be a better way other than having to manually adj each transaction.
P.S. Some of the confusion on comments on whether collect tax from place of business or where delivered, is in terminology. Sales tax vs Use tax.
I’ve tried to replicate this on my end and it gives me the correct rate which is 8.25%, Tx_User_128.
We’ll have to make sure that the address on your customer’s profile is correct especially the shipping address. It’s the basis of QuickBooks on how the sales tax is being calculated. You can follow these steps:
Then, let's create another transaction to verify if the rate is now updated. We can create an invoice or sales receipt.
You'll want to read this article about automated sales tax to learn more.
You're always welcome to post again in the QuickBooks Community. I'm here to help.
But the correct rate IS NOT 8.25%. The correct rate is 6.25% for our location. If we were within the city limits, it would be 8.25%. Our business is outside of the city limits, so the additional 2% is not added to our tax rate. We only collect and remit to the state at 6.25%. Your system thinks that because we have a city zip code, we must pay the full 8.25%. Again, we DO NOT AND SHOULD NOT collect or remit to the state the additional 2%. So, because QBO always adds the additional 2%, we have to modify every time we make a sale. Apparently QBO reads out zip code and assumes it's 8.25%. It does not work that way in Texas. Let me say again....we are not located within a city limit, so we do not collect the 2%. We only should collect and remit to the state 6.25%. If that's unclear, please let me know.
Thanks for adding more details about your concern, @Cold Springs Storage.
When calculating the rate, QuickBooks looks into the physical address. Aside from that, the state where you have a nexus and registered to collect sales taxes, etc.
Since your business is located outside the city limit, we’ll have to check the address to identify the appropriate sales tax rate. This requires pulling up an account to verify the information.
I recommend contacting our QBO Care Team since they can collect personal data in a secure space. They have tools to configure the setup of the Sales Tax Settings and make sure it calculates the correct rate.
To reach them:
For additional resources, the Find your sales tax rate for your state article contains links to each state agency. Click on the Sales Tax Rates: States P-W link to view the rate.
Let me know if you have any other concerns while working in QBO. I’ll be right here to assist further. Have a good one.
Contractors/service companies who work both inside and outside the jurisdiction, destination based sales tax are in play even on jobs within their city/county.
It's easiest to use an an example to explain the distinction I'm trying to make. company based in Plano, Texas, does a job for a customer who is also in Plano, is collecting:
State of Texas 6.25%
City of Plano 1.00%
Dallas MTA 1.00%
Then they do a job in Dallas:
State of Texas 6.25%
City of Dallas 1.00%
Dallas MTA 1.00%
Sales tax for Dallas MTA is being collected on both jobs. Once jobs are performed in more than two cities, with jurisdictions that potential overlap the various cities, it gets messy very quickly. Simply knowing that how much sales tax was collected on Plano jobs, and how much sales tax on Dallas jobs, does not solve the problem.
The old QB sales tax system did a great job of allowing us to set up all the component jurisdictions, and then combine them into sales tax rates for various locations. Quickbooks would give a report that totaled taxable sales by each component taxing jurisdiction, which could be transferred directly over to filing a sales tax report on the Texas webfile system.
Businesses in Texas who ship goods to locations around Texas are origin based.
If QB is going to attempt to have an automated system, it needs to give the option of allowing sales tax to be based on the ship-from point, or the location of the job.
As it is, it isn't very useful.
"I understand that you're only required to collect the state rate of 6.25%. As mentioned in this thread, sales tax are based on the address on where you do the work which also collects the city rate of 2% automatically"
But the new QB system (at least as of several months ago) does not calculate sales tax based on the shipto address on the invoice. It calculates it based on the address of the business. Which is exactly what it should do for a business that is shipping merchandise to other locations in Texas. The seller must collect sales tax based on the ship-point, not destination.
For a business that always collects based on the business location, there is no need for it to be automatic. We should be able to tell it the sales tax rate once, and be done with it. I have a client that is exactly like @Cold Springs Storage , They are not in the city limits, and QB insists on charging 8.25% on every invoice. They override every invoice, to collect the correct sales tax. They are a repair shop, and there are enough invoices to make it a hassle. On top of that, overriding the sales tax causes the sales tax liability report to come out incorrectly. It shows the correct amount of sales tax to remit, but gives the incorrect amount of taxable sales.
As I mentioned in the other reply I just posted, for some businesses the sales tax is always based on the business location....even when shipping merchandise to another city. And other businesses are performing services at various locations, and collecting sales tax based on those locations. QBO is even worse for these businesses.
Hopefully Intuit will get a grasp on the different scenarios in Texas. And I'd bet that Texas is not unique in this matter.
I appreciate the time you've taken in sharing all your thoughts and they're all noted, @sgib199.
Don't worry, I'll pass along your request to our product developers. This way, they'll consider utilizing the new automated sales tax calculation for some cases and customers, like you.
Additionally, you can also visit our QuickBooks Online Blog regularly. From there, you'll be updated with the new features and enhancements that our developers are currently working on.
Know that you can always visit our Help Articles page for QuickBooks Online in case you need some tips and related articles for your future tasks.
If there's anything else that I can help you with, please let me know in the comment section down below. I'll be always around ready to help.
I would like update my previous comments on QB's handling of sales tax for contractors in Texas.
QB seems to default to origin-based sales tax calculation in Texas. In the following article, "Sourcing services" is discussed more than half-way down the page. My clients in question fall under the exception that is discussed there for Texas.
QB can keep track of all of the jurisdictions (contrary to what I said previously), but the sales tax has to overridden on each individual invoice.
This is accomplished by clicking on the "sales tax" at the bottom right of the invoice.
Click on the pencil to the right of "Your tax agency and standard rate"
Answer NO to "Are you shipping this item?"
Put the customers address in the "Where did you sell it field". In many (most?) cases you can get by with entering the zip code of the job...if the job location is outside of the city limits and not subject to the full rate of addresses inside that city, you need to enter the entire address.
Do this on every invoice, and the Sales Tax Liability report will keep track of everything by taxing jurisdiction.
Agreed, our plumbers work in different cities/counties which require charging taxes at different rates. I do not want to pay a flat rate for the city of Santa Fe, NM as QB is making me. It's too high!!! The automated sales tax needs to be turned off - period
Hello @accounting40: You should see the option in sales tax where you can go back to the old style of sales tax.
But the new way does go by the shipping address, so it should process the sales tax properly for you.
I cannot go back to the old style. I have confirmed this with quickbooks tech. I did not choose to be in the new style. It forced me into it. Also, Texas sales tax is more complicated than your email implies. I run a service and parts company. Cleaning services are taxed at my location but parts and some other services are charged at their location. I have to make separate invoices for the same visit the way quickbooks works now. I also have to enter a physical address by typing it in or copy and paste. What once took a click or two now requires much more time. I have even had to enter the wrong address to get the right sales tax amount for a client. This is stupid. Id be happy to let you decide which sales district gets the money if youre willing to take the hit when I get audited.
Update: They have offered to allow me to go back to the old sales tax but to do so I have to spend the day migrating to a trial version desktop and then back to online. This is unacceptable. If I recall, when I originally migrated from desktop to online I had numerous problems with data being incorrect or not having survived the trip. If I do this I would rather just stay in desktop. Who knows when this type of thing might happen again with the constantly morphing online version?
I can see a duplicate post with the same issue. I'd suggest following the response provided by my colleague in this thread: https://quickbooks.intuit.com/learn-support/en-us/taxes/re-how-do-i-turn-off-automated-sales-tax/01/....
Get back to us if you have other questions about setting up sales tax in QuickBooks.
RE: We are located outside of the city limits, so we should not collect the city sales tax portion of 2%. We are only required to collect the state rate of 6.25%. Because our business has a city address (post office), then QBO assumes that we use the combined 8.25% rate.
Wow. This is such a basic thing. You'd think Intuit would know that neither your mailing or legal address cannot be used to determine if you are actually located within city limit, within a tax jurisdiction, or not. It is an abjectly ridiculous and sophomoric assumption. Does Intuit have any grasp on reality?
Here in Alabama we have different tax rates for differnet counties. I work all over the state and have to charge differnet rates. This automated tax doesn't even pick up county were we have to pay taxes. We need the option to beable to switch off without calling quickbooks. This was a horrible idea.
We made the mistake also and now all I get from support is the same workaround as you all. This needs to be corrected, no option to add local sales tax for locations that aren't on QB list is very short-sighted on Quickbooks part.
Have done that, works great until you try to save an invoice created on the mobile app. It shows the tax due, however, upon saving it defaults to the TX state tax rate ONLY. If you deactivate the TX state "Agency" tax it saves mobile greated invoices with No tax. I am having to manually charge via Gopayment and then assign income to statement once back at office and save tax rate. Only then can you send the completed invoice to customer. Ironic that the Tubotax company cant get a tax rate correct!!
I know this is a somewhat older thread, but generally sales tax transactions are sourced to the origin in Texas with a very limited amount of exceptions. The exceptions are handled by using a Tax Category. If you meet the qualifications in Texas and must charge sales tax at the destination address -- the location of service performance, you just need to create a service that is mapped to the proper tax category. If you use either of these 2 tax categories for the service you are selling, you will see that the sourcing will flip to destination --
Nonresidential real property repair and remodeling > For use in Texas only
Separated new construction or residential repair and remodeling > For use in Texas only
You can read more info on tax categories here: https://quickbooks.intuit.com/learn-support/en-us/set-up-sales-taxes/add-sales-tax-categories-to-you...
This would have been a great thread in which to prove that QB has broken my software.
I am currently looking for a new provider. My company IS Cash basis and cannot change; yet, I was forced to switch to the automated tax center. After quite a while on the phone, I am told too bad, so sad, we aren't fixing it.
I would like to hear from anyone who is using another software.
I would be interested too. I spent several hours on the phone with QB and got the same answer. I was forced to switch and now my Texas setup is gone and the new interface sucks.
I am switching to a new program as soon as I review a few competitors.
I'm in Washington state (with over 300 tax jurisdictions and destination based) I too am cash basis. I've spent so many years learning QBO and hate this so much am searching out new companies. Anyone switch to something else. Would love to hear your feedback about NOT Quickbooks. I am anti. It has totally messed up my sales tax system.