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Level 2

Sales tax on shipping not calculating

I have the automated sales tax center set up. When I create a sales receipt the sales tax is correct based on the product price, but it is not including the shipping fee. You can see from the attached image that there is no option to change the tax on shipping either. Why is tax not being auto calculated on the shipping fee? Would appreciate any help. Thanks!

Screen Shot 2019-03-14 at 12.39.46 PM.png

14 Comments
Level 9

Re: Sales tax on shipping not calculating

Shipping is not taxable in every State, and some if listed separately, only handling would be taxable. If you wanted to charge a taxable handling fee, you would need to add it as a separate item on your QBO sales form.

Level 2

Re: Sales tax on shipping not calculating

In this particular state shipping should be taxed. So I guess there is no way to do this automatically in the auto tax calculator?

 

Also, I'm guessing you would have two different accounts for shipping depending on if we comp shipping of if the customer pays?

 

Thanks!!

QuickBooks Team

Re: Sales tax on shipping not calculating

Hi there, acmaj.

 

I'd like to join this discussion and add to Certified_Pro's awesome answer.

 

To clarify, what particular state did you set up in QuickBooks for sales tax? Because, I've managed to replicate it here on my end, and I found out that shipping isn't included in the sales tax calculation for some states, like Colorado.

 

Just a gentle reminder, with the Automated Sales Tax Feature, QuickBooks is designed to calculate your sales tax based on the instructions from your state. That being said, it's possible that your state also doesn't include shipping for sales calculation. You could get in touch with your state agency to have this verified.

 

Lastly, regarding the accounts, you could set up two different accounts depending on how your customer will handle the shipping fee. However, please be sure to reach out to an accounting consultant to ensure this method is the best suit for your business. With Intuit's Find-A-ProAdvisor site, you can search for certified professionals in proximity to your ZIP code that can discuss options more personal to your business's needs.

 

Be sure to let me know if there's anything else I can do to help you succeed with QuickBooks. Thanks for reaching out, wishing you and your business continued success.

 

 

Level 2

Re: Sales tax on shipping not calculating

Ah, that makes sense then because it's Colorado that I'm actually having the issue with. The instructions from the state is to charge shipping, and it's done correctly through our website with Shopify. So it's weird that Shopify auto calculates it correctly, but not quickbooks. I guess the work around is that I have to manually add a line for sales receipts that include tax on shipping?

Anonymous
Not applicable

Re: Sales tax on shipping not calculating

Welcome back to our forum, @acmaj,

 

Allow me to step in for a moment and share some information to help resolve the errors.

 

If you're using the Automated Sales Tax feature, QuickBooks calculates taxes for shipping charges based on your state's tax regulations . However, if you're using the Sales Tax Center, you will only see a Shipping charge box which isn't taxable. As a workaround, you can create a taxable service item then apply it to your sales transactions.

 

Here's how:

  1. Click the Gear icon.
  2. Choose Products and Services.
  3. Select the New button.
  4. Pick Service from the Product/Service Information window.
  5. Fill out all the fields.
  6. Mark the Is taxable box.
  7. Click Save and close.

You can now use this item on your invoices or sales receipts.

 

If you'd like to know which states tax shipping costs and which don't, please check out this article: What Small Businesses Need to Know About Sales Tax and Shipping?

Let me know if you have any more questions about the Sales Tax feature in QuickBooks. I'm here to lend you a hand whenever you need one. Have a great day!

Level 9

Re: Sales tax on shipping not calculating

@Anonymous 

 

Shipping charges are NOT TAXABLE in every State. Here is a good article: https://www.bigcommerce.com/blog/shipping-sales-tax/#undefined

Anonymous
Not applicable

Re: Sales tax on shipping not calculating

Thanks for the callout, @Regina_Lend_A_Hand_Accounting,

 

There might be some confusion with my answer, and I'd like to make sure we're on the same page. I've updated the content for clarity.

 

You're right! There are states which tax shipping costs along with the sold product/item, while some states don't. QuickBooks is compliant with the state's tax regulations and guidelines to avoid non-compliance penalties. 

 

The article you've added is wonderful! This information will definitely help other users in this forum.

 

I appreciate your time today. Don’t hesitate to comment below if you have any questions or concerns. Have a nice day!

Highlighted
Level 2

Re: Sales tax on shipping not calculating

Hi Jen D

 

Level 2

Re: Sales tax on shipping not calculating

Hi @Anonymous 

 

QuickBooks Team

Re: Sales tax on shipping not calculating

Hello acmaj,

 

Colorado is one of the states that don't tax shipping costs, as long as the shipping cost is shown separately from the price item. The workaround you've mentioned above will work with QuickBooks (adding it as a separate line item.)

 

You can check out this blog for more information: What Small Businesses Need to Know About Sales Tax and Shipping.

 

Know that we're always here for you acmaj, if you need anything else.

Level 2

Re: Sales tax on shipping not calculating

Actually, it's not that straight forward. In Colorado there are two conditions that have to be met in order to not pay sales tax on shipping. 1) It needs to be listed separately and 2) The shipping has to be separable from the sales transaction. In other words, the customer has to have a choice of having the order shipped or picking it up at your location.

 

We are an online only store and therefore cannot meet the second one.

 

So I'm guessing there's not a way to tell Quickbooks to take any of these factors into account? I have to stick with the manual shipping entries?

QuickBooks Team

Re: Sales tax on shipping not calculating

I'm here to straightened this out for you, @acmaj.

 

As mentioned by my peers, Colorado is one of the states that don't tax shipping costs, as long as the shipping cost is shown separately from the price of the item.

 

However, some states have special conditions and restrictions that can make the taxability of shipping costs more complex. If you'd like to record the sales tax as taxable, you have to enter them as an item.

 

Jen already provided these steps, but let me give some screenshots to help illustrate them:

  1. Click the Gear icon.
  2. Choose Products and Services.
  3. Select the New button.
  4. Choose Service from the Product/Service Information window.
  5. Fill out all the fields.
  6. Mark the Is taxable box.
  7. Click Save and close.

For more insights, you can refer to this article: Create and use a products and services list.

 

If you're able to verify with your state that shipping costs should be taxed, please reach out with our phone team to investigate this further. Follow the steps on this link to get in touch with them: Contact the QuickBooks Online Customer Support team.

 

That should get you going today, acmaj. Let me know if there's anything else you need by adding a comment below. Have a wonderful day.

ProAdvisor

Re: Sales tax on shipping not calculating


@acmaj wrote:

Actually, it's not that straight forward. In Colorado there are two conditions that have to be met in order to not pay sales tax on shipping. 1) It needs to be listed separately and 2) The shipping has to be separable from the sales transaction. In other words, the customer has to have a choice of having the order shipped or picking it up at your location.

 

We are an online only store and therefore cannot meet the second one.

 

So I'm guessing there's not a way to tell Quickbooks to take any of these factors into account? I have to stick with the manual shipping entries?


@acmaj 

 

"So I'm guessing there's not a way to tell Quickbooks to take any of these factors into account?"

 

That's the bottom-line story here. QuickBooks automated tax system is not handling as they claim at this time.
Still, too many known issues (glitches) dealing with this new automated tax system in QBO.

 

If it works, you should see Tax on shipping field like on this screenshot below.

 

2019-03-14.png

Level 2

Re: Sales tax on shipping not calculating

@vpcontroller 

Thanks! Appreciate you confirming that I wasn't the one with the issue and that it is something that quickbooks hasn't taken into account with their automated tax system.

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