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Frequent Explorer *

Customer down payments will sometimes create a negative amount on the sales tax revenue summary report

As a landscape and construction business, we require down payments on projects. We have that set up as a liability that we record when we receive the down payment. When we bill out the job, we put it as a negative line item on the customer invoice. I have that item set up as non-taxable with it's own tax code of DWN. 


There are months when we finish a lot of jobs and so the down payment line on the sales tax liability report is negative. You can't put negative amounts on the Illinois tax form so I'm not exactly sure what I should be doing when this happens? 


I've watched a lot of videos and read a lot of articles that say to handle the down payments this way but there is nothing on how to do the sales tax right. I'm at a loss as to what to do. I would appreciate any suggestions!

QuickBooks Team

Re: Customer down payments will sometimes create a negative amount on the sales tax revenue summa...

I appreciate the details that you've given, @jstabler.


I've got a way that can help you record the down payments on your projects correctly and will clear out the negative amount on your sales tax liability report. I'd be pleased to share it with you.


The best way to handle down payments from your customer is to record is as an upfront deposit. This way, it will be reported as a liability and not an income even though the money has been deposited into your bank account.


On the other hand, to settle the negative amount on your sales tax liability report, you'll need to create an adjustment to increase the sales tax and will clear out the amount. Before doing so, I'd suggest consulting an accountant for specific suggestions on how to adjust the sales tax liability in QuickBooks.  


Once verified, here's how you can enter the positive tax adjustment: 

  1. From the Customers menu, select Enter Sales Receipts.
  2. Leave the Customer field blank.
  3. In the Tax drop-down, select a 0% sales tax item.
  4. If none exists, click Add New and create one.
  5. In the Item column, click the first empty line then select the sales tax item you want to adjust.
  6. In the Amount column, enter the amount of the adjustment then press Tab or Enter.
  7. Click OK when you receive the message "Changing the amount of a tax line item may cause your sales tax reports to be incorrect."
  8. Repeat steps 4 to 6 for any other sales items to be adjusted.
  9. Click Save & Close.

Also, you can refer to this link for detailed instructions about this process: Process sales tax adjustment.


Moving forward, you can start recording the payments through the upfront deposits or retainers procedure. To give you in-depth information about this, please see this article: Manage upfront deposits or retainers.


Lastly, if you need further assistance in performing these steps, you may reach out to our Customer Care Team. They have advanced tools that can guide you through this matter.


This should get you moving today, jstabler.


Please keep me updated on how things turn out on your end. I want to ensure you're up and running. Have a good one!

Frequent Explorer *

Re: Customer down payments will sometimes create a negative amount on the sales tax revenue summa...

I appreciate the help, but we're already doing it like this. The links to the articles are exactly how we handle the upfront deposits. The problem is on months when we finish more landscape jobs than we start (like now at the end of the season). We are applying more down payments to invoices than we are taking in and those negative numbers are causing the problem. 


Thanks again, and I will reach out to the customer care team for more assistance. 

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