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rosegold1
Level 2

How do I track sales tax owed in California for Delivery-related charges that are partially taxable so it is included in my sales tax return to CDFTA?

My business is in California. I use a dropship supplier outside of California. I do not charge tax on delivery charges to customers, but I do charge sales tax for the products. Customer receipts clearly show the method used to ship and the charge (example USPS Priority Mail for $25.56). The dropshipping supplier charges me for the shipping on my invoice from them (example US Priority Mail for $24.95). Occasionally, I charge the customer more than I pay for shipping. In this example, I owe tax on the $0.61 difference. How do I record this in Quickbooks as a partially taxable delivery charge and have it come through on the sales tax liability. I will obviously have to pay for the sales tax since I did not charge the customer. This is a requirement from CDTFA Publication 100, Shipping and Delivery Charges.

Solved
Best answer 2 weeks ago

Best Answers
RenjolynC
QuickBooks Team

How do I track sales tax owed in California for Delivery-related charges that are partially taxable so it is included in my sales tax return to CDFTA?

Thanks for coming back here, rosegold1.

 

With your current situation, you will need to manually calculate the difference. Then, record a journal entry for the two different charges that you want to combine. For the accounts affected, I recommend consulting with your accountant to make sure that your reports are accurate.

 

I have this article for the steps: Create a journal entry in QuickBooks Online.

 

In regard to the steps provided by my colleague GlinetteC, this helps adding the tax directly on a product or service item. You can learn more about the process by reading this link: Add tax categories to your products and services.

 

Please, feel free to leave a reply on this thread if there's anything else you need. My colleagues and I are always here to help. Stay safe!

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3 Comments
GlinetteC
Moderator

How do I track sales tax owed in California for Delivery-related charges that are partially taxable so it is included in my sales tax return to CDFTA?

Hello, rosegold1. 

 

You may want to create a product/service item and select the desired category account. Here's how:

 

  1. Click on the Gear icon select Products and Services.
  2. Click on New.
  3. Choose Service.
  4. Enter the Income account.
  5. Select I purchase this product/service from a supplier.
  6. Enter Expense account.
  7. Hit Save and close.

Income Account - can be set to an expense account and enter a negative amount on an invoice. To show that you will be paying the shipping for the customer. A positive amount if a customer pays the shipping.

 

Expense account - Can either set Cost of sold or expense, either way, they will be both at business's expense.

 

If you have any other follow-up questions on this, do add them below. I'll be sure to get back to you.

rosegold1
Level 2

How do I track sales tax owed in California for Delivery-related charges that are partially taxable so it is included in my sales tax return to CDFTA?

Can you provide more detail? In my scenario, a shipping charge is calculated on my website and charged to the customer. The customer purchase, including shipping charge is then pushed through a plugin to record the sales invoice and Square payment in QB. It is an approximation charged by a WooCommerce USPS plugin since I don't know what the exact final shipping charge will be for me when I purchase it from the dropship supplier to ship to the customer. So, I am working with the sales invoice having one charge and my expense recorded under the vendor having a different charge. How do I bring these together and then make a sales tax liability on the difference. I am assuming that this will be manual entry. 

Is this a General Journal entry or does this need to happen through an expense? I am sorry, because this is happening in two different parts of QB, I need to know how to tie these together. The end result is that I only have to pay tax on the difference between what I charge the customer for shipping and what my vendor charges me when my customer is paying more. So, I don't know what is the best way to track this. 
I don't quite understand how to apply the service that you are explaining. Can you elaborate enough that I know how to record the sales tax liability. I only need this in the case where I charged more for shipping than it cost for me to have the vendor dropship it to my customer.

RenjolynC
QuickBooks Team

How do I track sales tax owed in California for Delivery-related charges that are partially taxable so it is included in my sales tax return to CDFTA?

Thanks for coming back here, rosegold1.

 

With your current situation, you will need to manually calculate the difference. Then, record a journal entry for the two different charges that you want to combine. For the accounts affected, I recommend consulting with your accountant to make sure that your reports are accurate.

 

I have this article for the steps: Create a journal entry in QuickBooks Online.

 

In regard to the steps provided by my colleague GlinetteC, this helps adding the tax directly on a product or service item. You can learn more about the process by reading this link: Add tax categories to your products and services.

 

Please, feel free to leave a reply on this thread if there's anything else you need. My colleagues and I are always here to help. Stay safe!

View solution in original post

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