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Level 1

QuickBooks Online is automatically applying sales tax to late payment fees even though it is categorized as non-taxable. How do I correct this?

 
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Moderator

QuickBooks Online is automatically applying sales tax to late payment fees even though it is categorized as non-taxable. How do I correct this?

Let me help you sort this out, info1158.

 

To stop QuickBooks from applying sales tax to your late payment fees, you need to ensure that the option to Apply Sales Tax is disabled.

 

Here's how:

 

  1. Click the Gear icon at the upper right corner and choose Account and Settings.
  2. Go to the Sales tab and click Late fees.
  3. Make sure to disable the option Apply Sales Tax.
  4. Hit Save.
  5. Click Done.

I'll be leaving you this article to know more about the Late fees feature in QuickBooks Online. This will give you options on what other types of fees you can use as well as setting up different late fee rules for a specific customer. Also, you can follow the steps in the article to create a service fee item:

 

Set up and apply automatic late fees to invoices

Add service fees manually to invoices

 

After trying the steps above, let me know how it goes by leaving a comment below. I’ll be here to keep helping. Have a good one.

Highlighted
Level 1

QuickBooks Online is automatically applying sales tax to late payment fees even though it is categorized as non-taxable. How do I correct this?

Thank you for replying, but the Sales Tax slider does not appear in my settings for late fees. See attached pic.

Highlighted
Level 1

QuickBooks Online is automatically applying sales tax to late payment fees even though it is categorized as non-taxable. How do I correct this?


Thanks very much for replying. Unfortunately,the Sales Tax slider does not appear in my settings for Late fees. Do you have any other suggestions? Thank you very much for your time and assistance!

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QuickBooks Team

QuickBooks Online is automatically applying sales tax to late payment fees even though it is categorized as non-taxable. How do I correct this?

I have another way on how we can prevent this, info1158.

 

It's possible that your client is using the automatic late fees beta feature. That's why it's automatically applying sales tax to late fees. While you don't have the option to disable sales tax, we're expanding this feature to other customers and will continue to roll this out by batch.

 

You'll want to create an adjustment on your invoice for the charge by adding an adjustment service item. Then, enter it in your invoice as a negative amount to deduct it from your late fees.

 

Here's how: 

  1. Click the Gear icon.
  2. Select Products and services.
  3. Click New on the upper-right corner. 
  4. Select Service.
  5. On the Name field, enter Adjustment.
  6. Click Save.

Once done, create an invoice and enter the adjustment on the line item with a negative amount. Another simple way is to manually uncheck the Tax field so that it will not calculate sales tax. I've attached a screenshot for your visual guide.

 

You can set up different late fee rules to your customer. Please check this article for more information: Set Up And Apply Automatic Late Fees To Invoice.

 

Please keep in touch if you have any other concerns. I'd be glad to help.

Highlighted
Level 1

QuickBooks Online is automatically applying sales tax to late payment fees even though it is categorized as non-taxable. How do I correct this?

This is happening to me as well. There is no slider in the settings for sales tax. If I go to products and services and find the service "late fee" it is already set to non-taxable, yet when the late fee is added to an invoice it automatically checks the box for sale tax on the line item.

 

I chatted with customer service and Patricia Nicole said the following:

"I understand your frustration about the sales tax being applied automatically to late fees that creates complications in running your business. For now, the only workaround for it is to uncheck the sales tax box on the invoice manually. I want to thank you for bringing this to our attention and I really encourage you to leave a feedback so that this would be considered as a feature in the future."

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