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Frequent Explorer *

Clarifications on Sales Tax handling in Invoice When Credits applied

hi, i just noted that when i apply a credits on invoices with sales tax on QBO UI. it get applied with the total amount not on sub total. can you please guide me on this process? actually i have one case let me explain it to you:- for example i created one invoice with $30(amount) + $2.63(sales tax) total amount = $32.63 and for some reason i have to settle all the amount, for this i create a credit memo of $30. and then applied it to invoice. my invoice is still showing a balance of $2.63. here from a customer point of view if a there are no business done on invoice. and i refund all the amount than why i have to pay some tax to the government. here i attached some screenshots regarding this. i hope you understand my problem and guide me.

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Best answer 07-29-2019

Accepted Solutions
QuickBooks Team

Re: Clarifications on Sales Tax handling in Invoice When Credits applied

I can provide more details about sales tax, Anoop.

 

Technically, there's no sales happened since you returned the payment. So that means, these transactions should not be included on your sales tax.

 

On your screenshot, you'll need to unchecked the tick-box under Tax column on the invoice. This way, QuickBooks won't calculate taxes, and the amount on the credit memo will match on the invoice.

sales tax.PNG

Another option I can provide is to create the credit memo that is taxable as well. You'll want to create a credit memo with the same taxable amount with the invoice. By doing this, it'll automatically offset the taxes from the invoice.

 

Please let me know if you have other concerns.

4 Comments
QuickBooks Team

Re: Clarifications on Sales Tax handling in Invoice When Credits applied

Hello there, Anoop.

 

You can either un-check the Tax box or choose Out-of-Scope from the Tax drop-down menu on the invoice. This is to ensure that both transactions matched.

 

Here's a sample screenshot of what it looks like:

 

I'm also adding this article that contains information on how to enter and apply a credit memo.

 

You can always leave a reply if you have additional questions about invoices in QuickBooks. Thanks.

Frequent Explorer *

Re: Clarifications on Sales Tax handling in Invoice When Credits applied

hi RenjolynC, thanks for the update. i am familiar with this process. Actually i am developer and having an integration of QuickBooks with in our Application. i working on the functionality of apply credits on invoices. here is my case, let suppose i sold a product to customer,for this i created a invoice of $32($30 + $2(sales tax)) and received a payment of $32 from customer. after some time customer has return my product and asking for refund. for this i create a credit memo of $32 ($30 + $2). and apply to an invoice. In invoice the amount of credit memo is showing as a received payment(i.e $32).here is my question, i have return all the amount ($32) to the customer but according to invoice, i have to pay $2 as a sales tax. am i missing something or follow the wrong process?
QuickBooks Team

Re: Clarifications on Sales Tax handling in Invoice When Credits applied

I can provide more details about sales tax, Anoop.

 

Technically, there's no sales happened since you returned the payment. So that means, these transactions should not be included on your sales tax.

 

On your screenshot, you'll need to unchecked the tick-box under Tax column on the invoice. This way, QuickBooks won't calculate taxes, and the amount on the credit memo will match on the invoice.

sales tax.PNG

Another option I can provide is to create the credit memo that is taxable as well. You'll want to create a credit memo with the same taxable amount with the invoice. By doing this, it'll automatically offset the taxes from the invoice.

 

Please let me know if you have other concerns.

Frequent Explorer *

Re: Clarifications on Sales Tax handling in Invoice When Credits applied

hi @AlexV 
thanks for the information. i got my point.

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