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Level 1

Categorizing tax in paypal transactions


I have paypals intergration with quickbooks so paypal will automatically import transactions with already broken down splits for fees, shipping, and taxes


Paypal will take each of the splits and put in the memo sectikn what each item is, such as “paypal fee” or “tax amount”. EAch time i try to categorize the “tax amount” split to my tax account, i get this error:


You have either selected a tax liability account on a transaction where it's not allowed, or haven't specified a tax rate along with it.


Im a bit confused because not only do i have a tax account setup, but i have not had an issue moving other splits into my tax account. Any help is appreciated. Thank you

QuickBooks Team

Categorizing tax in paypal transactions

Hello @bcarruthjr,


You’ll need to make sure that the tax account is set up as a liability account from the Chart of Accounts. And I'd be glad to help you with this.


To check the set up of your tax account, you'll need to go to your Chart of Accounts. Here's how:


  1. Click Accounting, then Chart of Accounts.
  2. Look for the Sales Tax Payable accounts.
  3. Click View register.

From there, you can verify the if tax account is set up as a liability account.


Also, if the tax account was set up correctly and you still got the same error, I suggest performing some browser troubleshooting steps. This way, we can check if this is a browser issue or not.


Let's log out and log back in using a private browsing or incognito window. Depending on your browser, here's how:

  • For Google Chrome: Ctrl + Shift + N
  • For Mozilla Firefox: Ctrl + Shift + P
  • For Internet Explorer: Ctrl + Shift + P
  • For Safari: Command + Shift + N

If you get the same result, let’s try using a different browser, then try to categorize the tax amount from there.


Please feel free to leave a comment below if you have any other questions.

Level 1

Categorizing tax in paypal transactions

Mark, i will try this as soon as i get to my laptop. Just to mention, i had the exact same error from the mobile app on my iphone.


the account is currently setup as “other liability account”

Level 1

Categorizing tax in paypal transactions

@Mark_Rverified its not a browser issue.


Went back and double checked the tax account and its currently an other liabilities account.

I set up the tax account straight through the "taxes" pages.

Level 1

Categorizing tax in paypal transactions

@Mark_Rno luck on the browser. Tried a different browser and tried private browsing.


The tax account is setup as other current liabilities


I set it up straight through the taxes page and added a tax account from there


Categorizing tax in paypal transactions

Hi there, @bcarruthjr.


Thanks for getting back to us here in the Community after trying the solutions provided by my colleague Mark_R. Allow me to chime in for a moment and share some insights about the error you're getting when categorizing “paypal fee” or “tax amount” in QuickBooks Online. 


Since the fee is already taken out from your bank account before it's downloaded into QuickBooks, it's not a liability but an expense. Since the account is set up as "other liability account", you need to change it to an expense account to add the transaction to QuickBooks successfully. 


Additionally, to make sure they are posted to the correct account in the future, you can also change the mapping settings of your Sync with PayPal transactions.


Here's how: 

  1. On the left pane, select Apps.
  2. Select Firm Apps.
  3. Choose Settings from the Action drop-down.
  4. Select Edit in the App Settings section.
  5. Verify the account used for the Default sales tax on PayPal transactions (when no match is found).
  6. Click Save changes.

For more information and detailed steps, I've attached some articles for additional reference: 

If you need to reach out for more help, feel free to contact our Customer Care support for assistance. 


Here's how:

  1. Sign in to your QuickBooks Online account.
  2. At the top right, click the Help icon.
  3. At the bottom, click Contact Us.

That should get you back on track.


Drop me a comment below if you have any other questions about Paypal. I'll be happy to help you further. Have a great day ahead.

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