Hi there, Scott.
Using the sales tax feature is only intended for collecting and remitting sales tax to the state. However, you can manually track through Excel or using a third-party app. Let me share more information.
The sales tax feature isn't directly intended for calculating the tax you paid on your purchases, especially when you're trying to separate the original cost of goods from the tax you paid on them. It's not designed to break down the tax included in your purchase receipts.
Here's why the current sales tax feature isn't compatible for your needs and what alternatives you can consider:
- Focus on Output Tax: QBO's sales tax mainly calculates the output tax you charge for your customers. It's not meant to calculate the input tax you paid on your purchases.
- Tax Agencies: The sales tax feature is linked to tax agencies and reporting requirements. Even if you could somehow use it to calculate input tax, it will generate reports that you don't need and can cause confusion.
- No Itemized Purchase Tax Breakdown: QBO's sales tax feature relies on you setting up tax rates and applying them to sales transactions. It doesn't have a mechanism for automatically calculating the tax included within the cost of goods you purchase, especially when the tax isn't itemized on the receipt.
Alternatively, you can utilize tracking your input taxes using Excel. You can create a spreadsheet to track your purchases. In the spreadsheet, you can have columns for the item name, quantity, price per item, tax per item (calculated manually), and total cost. This will allow you to keep a detailed record of the tax you paid on each item. You can also use a third-party app that has this feature to achieve your desired outcome.
After that, feel free to visit these articles for your future reference:
Please don't hesitate to ask if you have additional concerns besides using sales tax in QBO. We're always here to ensure your business needs are met.
