QuickBooks Online Automated Sales Tax for Ohio

Sales tax in Ohio is typically calculated based on the location where the sale occurs or the service is provided, RJBreneman.

When you perform a service at the customer's location in Delaware County, the sales tax applied is based on Delaware County's tax rate. This is why the service item is correctly taxed at the Delaware County rate.

The inventory item, is taxed depending on the point of sale or the origin of shipment or delivery. If your business is located in Franklin County and the inventory item is considered sold from there, the Franklin County tax rate might be applied. This is why the inventory item is taxed at a special rate matching Franklin County's rate instead of Delaware County's rate.

Let's ensure that both the service and the inventory item are consistently treated as being sold or provided at the customer's location in Delaware County.

I'd still suggest consulting with a tax professional to ensure compliance with Ohio's sales tax regulations.

You can always return here. Then, post any other concerns about sales tax and anything related to QuickBooks. I'll be here to help.

Section 5739.033 of the Ohio Revised Code addresses the location of sale for the purpose of determining the applicable sales tax rate. This section specifies that the sales tax is based on the location where the sale is sourced.

In my scenario, the service company performs the service and sells an inventory part at the customer’s location in Delaware County as a part of that service. According to Section 5739.033, the sales tax rate is determined by the location where the service is performed and the tangible personal property is delivered. Therefore, the Delaware County sales tax rate of 7.00% applies to both the service and the inventory part sold to the customer.
@LeizylM, you said, "Let's ensure that both the service and the inventory item are consistently treated as being sold or provided at the customer's location in Delaware County."  When a service is performed at a customer's location and billable inventory is needed to perform that service, isn't it normal for the part to be taxed at the customer's location?  Why doesn't AST do that by default?

Thank you for reaching out about the Automated Sales Tax (AST) feature in QuickBooks Online, RJ. I understand your concern about the discrepancy in tax rates between the service and inventory item when performing a service at a customer's location in Delaware County. Allow me to address your issue and provide some guidance.

The Automated Sales Tax (AST) in QuickBooks Online uses a combination of default tax settings and specific tax categories assigned to each item. If service and inventory items are not consistently categorized, the system may default to the vendor's location for tax calculations.

To improve the functionality of AST and ensure it meets user needs, I recommend providing thoughts directly to our product developers. Your insights can help enhance the AST feature.

To send your input, here's how:

1. Open your QuickBooks Online account.
2. Go to the Gear icon located at the top-right corner of your screen.
3.  Under the Profile section, select Feedback.
4. Type in your suggestions and then click on Next.

To keep updated on the product's latest release and updates, you can check out this article: QuickBooks Blog.  

In the meantime, you may want to manually adjust the tax rate on the invoice to reflect the appropriate rate for Delaware County. Make sure to categorize the service and inventory items under the same tax category.

Additionally, I'll be sharing these resources to learn more about sales tax calculation and categorize and file your sales tax return in QBO:

• Understand the sales tax liability report in QBO
• Add a sales tax category to products and services in QBO
• File your sales tax return and record sales tax payments in QBO

Sharing your experience will contribute to better service and help prevent similar issues for other users in the future, RJ. I'm willing to lend a hand again if you have other questions about sales tax calculation in QBO. Drop a reply to this post or create another one. I'm here to assist you and will respond promptly to any inquiries you have.

@Aldren18Thanks for the reply.  "If service and inventory items are not consistently categorized, the system may default to the vendor's location for tax calculations."  They are both assigned to Taxable – standard rate.  Also, https://quickbooks.intuit.com/r/taxes/mapping-your-products-in-an-automated-tax-system/ indicates that no special categories apply to normal inventory items sold as part of a repair service call. 

"you may want to manually adjust the tax rate on the invoice to reflect the appropriate rate for Delaware County."  I'm not sure what you meant by this.  There is no option on the invoice to specify which tax rate each item uses individually when using AST. 

I was able to achieve the desired affect by changing the Shipping from field to match the customer's service address.  However, this isn't intuitive, and it seems like a kludge that shouldn't be necessary if AST were following Ohio Revised Code guidelines properly.

I will explore providing feedback.  In the meantime, this seems like a significant bug that should be reported to them internally.  Thank you.