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I'm experiencing some confusion regarding the Cash Basis accounting method in QuickBooks, specifically related to how gross totals and sales tax are calculated when receiving partial payments on invoices.
I would like to understand why the Gross Total is being calculated this way and how to accurately reflect my sales tax liability under the Cash Basis method. Any insights or solutions would be greatly appreciated!
Welcome to the Community, @dyb.
Let me share some information regarding the Cash Basis accounting method in QuickBooks Online (QBO).
With a cash basis report, sales taxes are calculated when you receive payment for an invoice, allowing you to recognize revenue when payment is received. This means that the sales tax is recognized only when the payment for the sale is received. Under the cash method, the invoice is treated as a sale when payment is received, and the sales tax amount is calculated at that time.
The Gross total depends on how much the amount is paid as well as the tax that has been paid. Your chosen accounting method or reporting basis affects the sales tax amount you owe.
It's important to note that the accounting method you choose for sales taxes may affect your financial reporting and tax obligations. It's important to consult with a tax professional to determine the most appropriate method for your business.
Furthermore, feel free to read through this resource to learn more information about the accounting methods in QuickBooks Online: Choose between cash and accrual accounting methods in QuickBooks Online.
Let me know if you have other QuickBooks concerns about sales tax calculations. I'm always here to lend a hand. Take care and more power to your business!
I have never had an issue with QB improperly calculating cash basis sales tax or incorrectly calculating gross sales unless they are being recorded incorrectly. You mentioned "I received a 50% deposit of $53.50. After applying this payment to the invoice, my sales tax liability report displayed a Gross Total of $150,". Anytime someone mentions receiving a "deposit" on an invoice, it raises a red flag. Are you sure that you properly received payment on the invoice by going to New > Receive payment and not creating a separate deposit? If so, can you post screenshots of your A/R register for this invoice/payment and the sales tax liability report showing this?
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