Sales Tax Calculated Wrong on Invoice

For informational purposes, this was set up for taxing Arcadia, WI [removed].

There are several factors contributing to why your sales tax isn't calculating correctly on your invoices, @bvstone.

First, let me share how QuickBooks Online determines the total tax rate for each sale. Here are the factors:
 

• Your customer’s tax-exempt status
• Where you sell and where you ship
• What you sell
   

The tax status of your customer or the state where you sell and ship the product or perform the services may be the reason why the sales tax is not being calculated on the invoice. Check out this article to determine: Understand and set up sales tax-exemptions in QuickBooks Online.

If it is verified that the customer and items are not set as tax-exempt, I suggest getting in touch with our Live Support Team. They can securely investigate and resolve the issue with your sales tax calculations on the invoice.

Here's how:
 

1. Go to the Help menu.
2. From the Search tab, select any article.
3. Click Contact Us.
4. Pick a topic or enter your concern, then select Continue.
5. Choose Chat with us or Have us call you.
    

Additionally, you can check out this article for future reference: File your sales tax return and record sales tax payments in QuickBooks Online.

Feel free to post if you need more help managing sales taxes in QuickBooks. 

@GebelAlainaM 

Did you even read the question before answering, or look at the screenshots?  It seems clear that none of your possible excuses apply.

Obviously not.  In my searching I've seen the exact same answer copy and pasted.  

That's AI for you...  such a wonder.... not.

Why is it so hard for QB to just recreate the issue and fix it?  Instead I have to spend hours on the phone with support and get no where.

So I did Intuit's job and dug deep into the item differences.

The item that WAS being taxed correctly was marked "I purchase this item from a vendor".  The others were not marked that way.

I removed that checkmark from the item that was properly being taxed and now nothing is getting sales tax on it.

That makes ZERO sense.  I'm not even sure where that setting came from, but it would be nice to get a list of items with that marked.  I supposed I'll need to do that myself as well.

Another update.

I changed an item from "non-inventory item" to "service" and it's now taxed properly.

Something changed in Q1... that doesn't seem correct at all.  These are software license keys I'm selling.  Not a service, not a tangible item, not inventoried.  So now I need to go and change all my items.  Aye Caramba.  

I take that back.  I changed the item back to non-inventory item and it still is charging tax correctly.

So, it was non-inventory.  Sales tax not being charged.

Changed it to service.  Sales tax being charged.

Changed it back to non-inventory.  Sales tax still being charge.

This makes NO sense whatsoever, Intuit. 

So I dug into the JSON data for the items to compare items.  For the item I was playing with somehow QBO decided to change it to taxable (I did NOT change this setting, it was always non taxable). 

Once I removed that, it no longer was taxed as a line item even if i had marked it on the invoice as taxable.

Intuit/QBO... your logic is flawed for sales tax.  You need to fix it.  

When you are creating an invoice if the Invoice line item is marked as taxable, no matter when the item taxable setting is, you SHOULD be calculating taxes for it.  Just like it worked for years up until Q1 of 2025.

The funny part is, the "Taxable Subtotal" IS correct... but whoever wrote the code (and recently updated it) to calculate the actual sales tax must have missed a meeting or something.

Well, I just spent 40 minutes with support showing them how to recreate the issue.  They said yes, it's a bug and that there is an "active investigation" out there on it.  Well, after a bunch of messing around and trying to quick fix the issue.

But, it took 30 minutes to get to that point.  They had me make sure the customer wasn't marked as tax exempt (they weren't).  They had me change the item itself to taxable.  I humored them and showed that yes, that will make it work.  But, it took a lot of explaining to them to understand that companies in the US don't charge the same sales tax to every customer, only those states we have nexus in.  So, changing all my items to taxable is NOT a solution.

He then wanted me to set up a custom tax rate in the invoice and I finally said "no...  this is not a solution.  It is a bug and needs to be fixed... either that or you need to make users of QBO aware that since Jan 2025 you now need to mark items as taxable at the item level, AND mark it as taxable on the invoice for it to work, which never was the case before."

I even offered to log on for free.  I bet I could find the code in 30 minutes... an AND instead of an OR most likely... logic errors. Coders these days.. lol

So frustrating.  and it probably messed up the sales tax for a lot of QBO users and they won't know it until they do their quarterly sales tax reports/payments and find out they didn't collect enough sales tax from customers, but still have to pay the right amount into each state.

I got a message about the issue saying:

"We appreciate your patience while we looked into your issue. After investigating the issue, we found that we did not receive enough information to complete an in-depth investigation to your concern.

If you have any more information about your case (screen shots, video, etc) , contact us with case number 15135668091 for further review."

How incompetent is the IT team for QBO?  I literally worked with a support member for almost an hour showing him the issue!  He recreated it himself.  He admitted it was a bug.

How could you need any more information?

Just ignore your customers.  That's the best way to do things. 

RE: How incompetent is the IT team for QBO?

You've used QBO, right? Which should be all you need to answer that question.