Sales tax payable on balance sheet.

Sales tax payments can often be a daunting and complex process, kelvin4. It's a challenging task but with the right guidance and tools, it can be streamlined and simplified. I'm here to help you effectively clear out your sales tax payables in QuickBooks Online (QBO) and maintain accurate financial records for your business.

There are two possible methods we can consider to effectively manage your financial records and ensure accuracy in your Balance Sheet. The first one is to record the sales tax payments. If these outstanding tax payables haven't been reported or you haven't settled these tax obligations, you'll need to process the payments first. This will help maintain the integrity of your financial statements and ensure your liabilities are represented accurately. If you're using the automated sales tax system within your accounting software, you can follow the detailed steps outlined below:

1. Go to Taxes, then Sales tax.
2. From the Select an agency dropdown menu choose a reporting firm.
   
3. Scroll down to the bottom section and pick the transaction in question then click Review sales tax.
   
4. Once done, hit Record payment.
   
5. Enter the tax payment amount in the Tax amount field.
6. Select the Payment Date.
7. From the Bank Account dropdown, select the account you're making the payment from.
8. After that, click Record payment.
   

On the other hand, if you are not utilizing the automated sales tax settings in your accounting software, there are still effective ways to manage your sales tax obligations. In this case, I recommend referring to the following article for detailed information and guidance. This resource will provide information on manual sales tax calculations, reporting requirements, and best practices for ensuring compliance with tax regulations: Manage sales tax payments in QuickBooks Online.

The second one is if these sales tax payables have been settled but not recorded in the software, I recommend creating journal entries to resolve the balances. In line with this, I highly suggest consulting an accountant to ensure all adjustments are compliant and accurately reflected in your financial statements. 

Finally, please feel free to reach out if you have any further questions or need assistance managing your sales tax obligations, kelvin4. We understand that navigating sales tax can be complex, and we are here to support you every step of the way. If there are specific aspects of sales tax that you are unsure about or if you encounter any challenges in the process, don’t hesitate to let us know. Just click the Reply button, and I will respond as soon as possible to provide the information or guidance you need.

Erika, thanks for the info.  The problem I have is sales tax payable going back as far as 2021.  The taxes were paid but not recorded in quickbooks online.  The invoicing was done in QB online so it was showing as taxes due for those past reporting periods but paid outside of quickbooks.  How can I record those as paid without affecting our current financials?

Thanks for getting back here with additional details about your sales tax-related concern, kelvin4.

Manually recording the sales tax payment will have a substantial impact on your accounting records, as it will create a corresponding entry in your bank register.

As a workaround, you can create journal entries to clear out the outstanding balances. However, I would strongly advise you to consult your accountant for further guidance on this matter, particularly regarding the specific accounts you'll be using to offset the sales tax payable.

This ensures everything is done accurately based on accounting best practices and tax rules. Let me walk you through the steps:

1. Click the + New button and select Journal entry.
2. Select the sales tax payable and an offsetting account in the Account column.
3. Enter all other required details, then click Save and close.

You can read more details about this process here: Create Journal Entries In QuickBooks Online.

Here are some additional articles related to sales tax that you can save for future reference:

• Understand And Set Up Sales Tax Exemptions In QuickBooks Online
• Override Sales Tax On Transactions In QuickBooks Online

The Community is also available if you have any other questions when dealing with sales tax collection, payment, or general bookkeeping tasks. Please feel free to post any follow-up questions or new concerns. We're here to help explain features, provide virtual assistance, and support you as needed.

@kelvin4 

If you have a sales tax payable balance then you must have another account that is overstated by the same amount (this is double-entry accounting after all).  When the invoices were created in QB Online, your A/R increased by the cumulative total of your sales tax payable and presumably income (based on the items/services on the invoice).  Did you receive payment for these invoices in QB Online?  If not, then your A/R is overstated and can be cleared against the sales tax payable with a journal entry - debit sales tax payable, credit A/R.  The issue with that is A/R can only be cleared against specific customers so you may need to set up a different OCA receivable account that acts as a contra account that will carry a negative balance. 

If you did receive payments in QB online for these invoices (I assume you didn't), then your bank account would be overstated by the amount of sales tax payable since you received the cash but never issued payment to your sales tax agency and A/R could be cleared against that.  

Rainflurry, thanks for the info.  Our problem is we were using 2 different accounting systems for a couple of years.  We invoiced and collected payments through QB online which created the tax payable.  We then recorded the receipts in QB desktop and paid taxes there.  We then changed everything back to QB online to simplify accounting but had several issues to deal with from the double accounting.  It created a real mess.  We have been able to correct several issues but have several more to deal with. The sales tax payable balance is one of our biggest remaining issues.  I know it will likely require a journal entry, but not sure how to offset the sales tax payable with another account to get rid of the prior 2 years of taxes that were paid elsewhere but not recorded in QB online.

@kelvin4 

Based on your description, if you issued the invoices and received payment in QBO but paid sales tax in QBD, then your bank balance should overstated in QBO because you received payment on the invoice but never remitted sales tax.  Is that the case?  If you adjusted the bank balance in QBO, what account did you use to offset that?  Those questions need to be answered to resolve this.

Rainflurry, our accounts were not connected to QB during this period.  We could receive payments through QB but it did not track our accounts.  The account is accurate, but QBO is not.  It recorded sales tax payable but had no way of tracking payments made.  I am afraid that the only way to fix this is to create a new account and start over, but we are trying not to do that since there is so much info already there to recreate.