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Join nowI have been confused for some time regarding how to handle payment of sales tax. Theoretically, posting it all to the ST payable account and then using Pay Sales Tax, in conjunction with sales tax adjustments, should work. However, there are two complications with QuickBooks' approach to sales tax that make it messy, if not entirely unusable:
1. Due to the differences in rounding at the invoice level and at the quarterly total level, there is always a small difference between the tax collected and tax due. I understand that this can be corrected using the ST adjustment process; however, in my state (Washington State), sales tax is collected in two tiers: state rate that is the same for all transactions, plus a local rate that varies by location. This means that an overall adjustment to sales tax may well reflect adjustments to separate line items, not a single adjustment to the overall total. And if adjustments to multiple areas happen to offset one another, it may well mean that one tax location needs an upward adjustment, while another tax location needs a downward adjustment--all with no net adjustment to the sales tax liability to the state. That is, I highly prefer to have the adjustment made at the line-item level so that I have an accurate record in QuickBooks of the amount paid by sales tax location that matches my tax return. Apparently, though, QuickBooks allows adustments only at the account level, not per line item--meaning that I would have to have a separate account for each sales tax location, which is entirely unworkable. And because all sales tax is reported on a single return, it naturally involves a single payment, so it is not workable to select each sales tax location (line item), do an adjustment, and pay that tax. That would result in many checks in my register that actually make up a single payment to the state.
2. My state taxes must be paid in a single payment, based on my quarterly return calculations, that includes sales tax and other state business tax, such as use tax on business items purchased out of state and the tax on doing business. If I use the Pay Sales Tax process, QuickBooks will not allow me to go back into the check, change the amount, and add line items for the non-sales-tax portions. That is, my single check to the state must include entries against my Sales Tax Liability account and expense accounts for business taxes. And I think it would be a very poor idea to create separate entries in the check register that constitute what is, in reality, a single check. That would cause confusion when balancing the checking account.
While I would prefer to have adjustments made at the tax-location level, I suppose I could live with the lack of transparency inherent in #1 by just doing one adjustment per quarter. But I cannot overcome #2, and it has kept me from using the Pay Sales Tax feature from the outset. So I have been paying sales tax outside the Pay Sales Tax process, but that has two complications of its own:
1. Since QuickBooks will not give me a way to include the sales tax in gross receipts, I have to be careful to avoid reporting sales tax paid as an expense in my annual federal tax reporting.
2. The balance of my Sales Tax Liability account continues to grow. I understand that I could simply adjust this down to zero now and at the end of each quarter, but I am not sure that would serve any useful purpose for my one-person business where I do my own accounting. It is more likely to cause confusion to an accountant or auditor someday.
I understand, at this point, that cleanup would involve going back to the beginning and working my way forward, but before I am willing to try this, I need to know if there is a workable way to force the square peg of QuickBooks' approach into the round hole of the real world. I think the core question comes down to how to pay sales tax on the same check as other taxes paid to the same vendor.
Ideas?
Solved! Go to Solution.
Whew. I can address a few things.
"Theoretically, posting it all to the ST payable account and then using Pay Sales Tax, in conjunction with sales tax adjustments, should work."
You should be letting the Sales Transactions handle the calculations and the posting for you. Are you describing Manual Entries?
Whew. I can address a few things.
"Theoretically, posting it all to the ST payable account and then using Pay Sales Tax, in conjunction with sales tax adjustments, should work."
You should be letting the Sales Transactions handle the calculations and the posting for you. Are you describing Manual Entries?
"and resulting in a clearing account balance of $0."
That is Exactly Correct :)
The point of Clearing is to always end that task session at 0. So, reconcile that "bank" account to 0, to show you verified this session ends at 0 and everything is In Balance.
While I am struggling with the fact that QBO only adds up sales tax we collect from our sales and does not deal with B&O taxes that are reported on the same form as Sales Tax when filing, this is how I deal with the multiple Sales Tax rates for all the different locations:
(We are a service business; construction in different locations with differing sales tax rates). I put each location address in the Ship To section on the INVOICE and QB automatically computes the sales tax for that location even though we don't actually ship anything.
See if that works. At least it takes the manual computation for all the Sales Tax locations.
However, I am still ticked off that when trying to add an additional WA State tax (B&O) there is no option to. I see other States in the dropdown menu allow counties / cities to be added to their agencies, but not WASHINGTON. Would be an easy fix for QBO developers to add.
Hello there, @NWAdventure.
I appreciate you sharing this information about handling sales tax with differing rates. This would surely help other users who have the same concern as yours.
On the other hand, our developers are continually working to improve our products to meet our customers' needs and demands. I'd encourage you to visit our QuickBooks Online Blog to be updated with our latest news and updates including what our Product Care Team is working on.
Additionally, if you need assistance in the future that requires live technical support, feel free to reach out to our Customer Care Team.
You can always visit the Community if you have any queries with QuickBooks. I'll be around to lend a helping hand. Have a great weekend!
yes I contacted both already
@BettyJaneB wrote:Hello there, @NWAdventure.
I appreciate you sharing this information about handling sales tax with differing rates. This would surely help other users who have the same concern as yours.
On the other hand, our developers are continually working to improve our products to meet our customers' needs and demands. I'd encourage you to visit our QuickBooks Online Blog to be updated with our latest news and updates including what our Product Care Team is working on.
Additionally, if you need assistance that requires live technical, feel free to reach out to our Customer Care Team.
You can always visit the Community if you have any queries with QuickBooks. I'll be around to lend a helping hand. Have a great weekend!
yes, i contacted both thanks
You're most welcome, @NWAdventure.
QuickBooks aims to help you run your business easier. That said, I will also do my part and notify you through this thread whenever I receive updates about this concern.
In the event that you should have questions about this, or need anything else, you can find me here. Cheering you to continued success in all of your endeavors.
My apologies for not responding long ago; for some reason I don't remember I wasn't able to find my way back to this thread. Thanks for the instructions; they should get me past my sticking point!
Since my client pays many different sales tax localities I do separate them in the Sales Tax processing, but it should work exactly the same way (one rate for the state, one rate for each locality, then a sales tax group for each locality that splits the state and local amounts). I do this more for my benefit, so I can cross-check the DOR return. Occasionally have to make an adjustment when the state and local rates both round in one direction but the combined total rounds the other, but he's a monthly filer so it's seldom an issue.
(And thanks to NWAdventure for posting, generating an email that let me find this thread again!)
Thank you for joining back in this thread, @dsliesse.
I can share some more insights about the Sales Tax feature.
The calculation of sales tax in QuickBooks Online are according to your setup and the following information:
To avoid creating adjustments, make sure to enter them correctly as QuickBooks do all the accounting for you. For further details, you can check the Automated Sales Tax article.
That should do it, @dsliesse. Keep me posted if you have follow-up questions about sales tax. I'm always here to offer assistance.