Default for sales tax liability

Hello there, @Big-Al. 

I admire your resourcefulness in locating the sales tax liability account in an invoice.

Concerning the default sales tax GL # assigned for when tax is charged on an invoice, QuickBooks uses Sales Tax Payable as the default account when you create a sales tax item. Hence, we're unable to change it and assign to a different account. 

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Here's an article that can guide you in setting up sales tax in QuickBooks Desktop.

Get back to me if you have any follow-up questions about managing your sales tax liabilities. I'll be up here to help you right away.

Thank you for your response.  I do have a couple followup questions:

1 - Do you recommend that the sales tax GL account be an Accounts Payable type or an Other Current Asset?

2 - Should there be only 1 Accounts Payable type?  The setup here has a few others (like insurance payable for example) that are set up as Accounts Payable type.

3 - Can we change the account type without creating problems someplace?

4 - If our state charges the following types of sales tax:   

* state sales tax of 4.5%

* county sales tax in some counties

* city sales tax in some cities

Can we have multiple tax types for a customer, or do we have to create a code for each grouped sales tax to charge the accumulated amount, and then have to break down the reporting for counties and/or cities manually?

Thanks in advance.

Hello there, @Big-Al.

I've come to answer your follow-up questions about the Accounts Payable (A/P) type and sales taxes so you can manage your transactions in QuickBooks Desktop (QBDT) and keep your financial data accurate.

For your first question, I encourage you to reach out to your accountant. They can recommend the appropriate sales tax GL account and provide expert advice and direction tailored to your business needs.

With QBDT, you can use multiple A/P types/accounts. The system will let you choose one when you enter and pay your sales taxes. You can refer to this article for more details: Work with the chart of accounts in QuickBooks Desktop.

Yes, you can change the account type for some of your accounts (non-default ones like Bank, Asset, Liability, and Equity) to keep your Chart of Accounts accurate. However, this action isn't applicable (restricted) for A/P types. This is because this activity may cause issues that can affect your existing data.

In case you need to update an account's type, please see this article's Edit an account section for the complete guide: Add, edit, or delete accounts in QuickBooks Desktop.

Finally, when one sales transactions has multiple tax rates, you may need to show those different tax rates separately on the printed form for your customer. To do this, please see this article for the step0by-step guide: Show multiple sales tax items on an invoice.

Once you're done recording all your sales tax transactions, you can run reports to help you review your payables and make sure your record is accurate before paying your taxes.

Also, you may want to check out these articles as your reference to learn more about A/P workflows you can use and how you can troubleshoot issues you may encounter while managing sales taxes in QBDT:

• Accounts Payable workflows in QuickBooks Desktop
• Resolve common sales tax issues

Keep me posted if there's anything else you need about managing accounts and sales taxes in QBDT. I'm always ready to help. Take care, and have a great day, @Big-Al.

Another question?

* When paying sales tax, I was going to enter a regular vendor payable and code the tax portion to the sales tax liability and the interest/penalty to those GL accounts, but I saw a display box that said I should go to the Vendor Center and choose Pay Sales Tax to track it.  Unfortunately, I didn't see any way in that process to allow me to enter any amount for penalty and/or interest.  Am I just missing something, or does the presence of interest / penalty make a need to use regular AP Bill entry and then payment?  What is a process you've used to pay interest / penalty?

Thanks for getting back to us and sharing your additional concerns, @Big-Al.

With regards to processing an interest or penalty in QBDT, we can do a sales tax adjustment. This allows you to move your money into or out of your Sales Tax liability account. To do so, here's how:

1. Go to the Vendors menu and select Sales Tax, then Adjust Sales Tax Due.
2. From the Sales Tax Adjustment window, enter the adjustment date, sales tax vendor, adjustment account, and other required information.
3. Go to the Adjustment section, choose if you need to increase or reduce sales tax, then enter the adjustment amount.
4. Select OK.

Please know that we can choose an Income account if you're making an adjustment to receive a discount or credit or if you are entering a negative rounding error. Otherwise, choose an Expense account if you're making the adjustment because you need to add penalties and fines or if you are entering a positive rounding error.

Once done, we can now proceed to adjusting the amount for sales tax items. Here's an article for the detailed step-by-step process: Process sales tax adjustment.

Additionally, I'll share with you this resource in case you encounter problems while working on your sales tax: How to resolve common sales tax issues.

Fill me in if you have more queries with sales taxes in QBDT. I'd be glad to assist you further. Take care always and best regards.