Sales Tax Rounding Errors

I just ended up adding a .01 credit to the deposit and linked it to the client who had the extra penny on their sale. 

Hi, I have the same problem as you. I am wondering if you could show me how to adjust it? Thank you,

Hi, I have the same problem like you. I am wondering if you could show me how to adjust it and link it to the client? Thank you.

Allow me to step in and share how you can create a credit for the remaining penny, levenien.

You can use the Credit Memo feature and apply it to the invoice. Here's how:

1. Click the Plus (+) icon and select Credit Memo.
2. Choose the customer name.
3. Enter the Credit Memo Date.
4. Fill in the necessary information.
5. Click Save and close.

And, here's how to apply it to the invoice.

1. Click + New, then Invoice.
2. Create the invoice.
3. Select + New, then Receive payment.
4. Mark the credit and the invoice.
5. Click Save and Close.

I'm also adding this for a video tutorial and steps of you need to automatically apply credits to future invoices:: Learn how and when to give a credit memo to customers.

Don't hesitate to post again if you have additional questions by commenting below. I'm always right here to help you fix the extra penny.

Hello Mary, 

Thank you so much for your help. I have succeeded to add the credit memo to the customer, I am wondering if the credit given to the customer deducted from my income account or it is just a discount credit?

This is my case:

For example, my ecommerce sales order:

The sales of the items: $110.94

Sales tax: $8.03

Total: $118.97. This is the amount that my bank account received from the sales.

My QB desktop automatically round up the tax when I create an invoice:

The sales of the items: $110.94

Sales tax: $8.04

Total: $118.98.

It is $0.01 difference in sales tax. As your instruction, I made a $0.01 credit memo to that customer and applied it. The invoice is $118.98 - $0.01 = $118.97 now. It matches my deposit. My question are: I checked my Merchandise Sales account in my income, it is $110.94. However, the Sales Tax Payable is still $8.04. The invoice is only $118.97 now. Where does the $0.01 goes to? Also, do I need to adjust the sales tax payable to $8.03? And how do I make all the accounts match?

Thank you in advance.

Thank you for your quick reply, @Lien TL. I’m here to help with your concern about sales taxes in QuickBooks Online.

To keep your sales tax accurate, you can use the Automated Sales Tax function.

Here’s how to create an adjustment:

1. Go to Taxes.
2. Enter the dates and click View return to look for the period you want to adjust.
3. Click Add an Adjustment.
4. Enter the Date, Reason, and Account and for adjustment Amount.
5. And select

Also, you can utilize this article to give you more information about creating sales tax adjustments.

There is an option to update historical transactions. Note that this only applicable for non-inventory and service items. Here's how to do it: 

1. Simply go to Sales
2. Click Products and Services.
3. Find the Service item you want to change, and click on Edit.

Make sure you're using the exact accounts to each item.

In addition, use this link below as your reference for sales taxes in QuickBooks Online (QBO).

• Set up and use automated sales tax in QuickBooks Online.
• Learn how QuickBooks Online calculates sales tax.

For other assistance regarding your tax filing, visit us anytime. I'll be right here to help you out.

Hello Christine,

Thank you for your instruction. After decreasing $0.01 sales tax, do I need to add that amount to any other account to make the accounts balance? Because the system had me to credit one account and debit the other account. I can't just adjust the sales tax only. 

Thank you.

We're glad to have you back, @Lien TL. 

Yes, you got it right. You can add the amount to another existing account to keep your accounts balance. However, I'd highly recommend consulting your accountant to make sure you accounts and accounting reports will remain accurate.

If you're looking for an accountant, you can follow the steps below:

1. Go to our Find an Accountant page.
2. In the Find an expert in section, choose what you're looking for, then use your search field to enter a City or ZIP code.
3. Click Search. You can click on each ProAdvisor's profile to learn more information about them.

I've collected some resources for additional insights:

• Learn how to record journal entries in QuickBooks Online.
• Manage sales tax payments in QuickBooks Online.

We'll be around if you have additional concerns, levenien. Take care and have a good one!

Dear Christine.

That is a workaround, not a solution to underlying problem with QB online.

If I use QB Desktop the VAT/TAX ammount is correctly calculated in every single transaction.

If I use QB Online, the VAT/TAX is always rounded up to the nearest cent/penny, whatever currency you are using.

It is a coding issue, which is there from day 1 of the release of QB Online, and noone seems to find it.

Why should your clients/users, spend days explaining to the accountant/revenue/taxman/vatman, whichever body in charge, that you are using an accounts package, which is actually stupid?????

Omygod thank you! I thought I was going crazy! What is the fix for this??

Let me guide you on what you can do about this, Office155.

You can create a sales tax adjustment to keep your records accurate. To do so, follow the steps below:

1. Go to the Gear icon️ and select Chart of accounts.
2. Click New.
3. From the Account Type ▼ dropdown, select Income or Expenses.
   • If you need to decrease your sales tax due, set up an income account.
   • If you need to increase your sales tax due, set up an expense account.
4. Choose the account’s Detail Type.
   • Use Sales of Product Income for an income account.
   • Use Taxes Paid for an expense account.
5. Name your adjustment account (for example, sales tax due increase).
6. Click Save and Close.

Once done, add the adjustment. Here's how:

1. Go to Taxes, then select Sales tax.
2. Enter the date range in the Due Date Start and Due Date End ▼ dropdowns, then select Refresh.
3. Find the tax period you need to adjust, then select View return.
4. Select Add an adjustment.
5. Select the reason for the adjustment from the Reason ▼ dropdown menu.
6. Add an adjustment date.
7. Select the account for adjusting sales tax from the Account ▼ dropdown menu.
   • Choose an expense account if you need to increase the tax due.
   • Choose an income account if you need to decrease the tax due.
8. Enter the adjustment amount.
9. Click Add.

To give you more information about managing your sales tax, check out these resources for your guide:

• Create or Delete A Sales Tax Adjustment in QuickBooks Online
• Manage Sales Tax Payments in QuickBooks Online

Furthermore, learn how QuickBooks calculates the correct tax rate on each sale. I've added this article for more information: Learn How QuickBooks Online Calculates Sales Tax.

You can always get back to us if you have any questions about sales tax. We're always here to assist you. Have a nice day ahead!