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Level 1

Sales Tax - orgin based vs destination based

Hi:

We are located in Nashville TN and collect TN sales tax.  TN is an origin based state so we should be charging 9.25% (7% state + 2.25% local).  We have sales tax turned on in QB Online.  We shipped product to a customer in Memphis TN where their local tax is 2.75%--QB charged 9.75% and that's not correct, it should be 9.25% since TN is origin based.  Can this be automatically sent to calc correctly on origin?  It doesn't seem like I should have to review every invoice before it goes out and manually override the tax.  Please let me know if anyone has any fixes etc?

Thanks!

4 Comments
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QuickBooks Team

Sales Tax - orgin based vs destination based

Hello there, @nbokish.

 

Allow me to share with you some insights about sales tax calculation in QuickBooks.

 

Our Automated Sales Tax system is based the rate on the address provided on an Invoice. Otherwise, it will use your company address' location to calculate the rate. 

 

If the business is default to Nashville, you'll have to manually override the tax since it's a different address that may cause changing the sales tax.

 

 Also, make sure that your customer's address is Memphis, if the company address is unchanged it will keep using the default sales tax which is 9.75.

 

See screenshot for visual reference:

Joesem Molat.JPG Joesem Molat.JPG

You can also create a custom tax rates when you make a sale, here's how:

 

  1. Go to Taxes, then Sales tax.
  2. Select Sales tax settings.
  3. In the Custom rates section, select Add rate.
  4. Select Single or Combined.
  5. Enter the Name of the custom rate. 
  6. Select the Agency you file payments to.
  7. Enter the Rate, then Save.

 

For additional reference, I'm attaching some articles about Sales tax that you may find helpful: 

 

 

Please know that I'm just a reply away should you need anything else you need with QuickBooks Online. I'd be happy to help. Wishing you well.

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Level 13

Sales Tax - orgin based vs destination based

@nbokish 

As additional option, explore this AST Filing & Reporting app to integrate with your QBO. You may find something useful.

https:// taxjar.grsm.io/mytax

 

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Level 1

Sales Tax - orgin based vs destination based

I'm not sure you understand my question.  TN is an origin state for sales tax, meaning sales tax should be based on our address, the sender of the invoice, but Quickbooks is basing sales tax calculation on the address of my customer the "shipping" address on my invoice.  Why doesn't Quickbooks know that TN is an origin state and not a destination state--it's a very basic thing.  It doesn't seem correct that I will need to modify/override every single invoice.  That is just feasible.  Please advise.

Highlighted
QuickBooks Team

Sales Tax - orgin based vs destination based

Thanks for getting back, @nbokish


Allow me to share some information on how QuickBooks Online calculates sales tax.


When you add sales tax to an invoice in QuickBooks, the calculations are automatically taken care of. We calculate the sales tax rate based on date, location, type of product or service, and customer.


That said, QuickBooks calculates based on the location of sale or the "ship to" (destination address) you add in an invoice or receipt.


You can create a Product/Service item for shipping and mark it as taxable as a workaround. This way, the origin address will be followed. And when you invoice the customer, you can leave the shipping address blank. Then, the system will calculate base on the item entered or selected on the invoice.


Let me show you the steps:

 

  1. From your left navigation pane, go to Sales.
  2. Select Products and Services.
  3. Hit the New button.
  4. Choose product/service, then enter the needed details.
  5. Click Taxable under the Sales tax category.
  6. Press the Save and close button.


You might want to check these helpful resources for additional information about sales tax:

 


In addition, you can also visit this article to learn more about how to manage sales tax payments in the Sales Tax Center: Manage sales tax payments in QuickBooks Online.


We always value our customers who are keen to give us their feedback. You may consider this information I’ve shared to get you going. Take care.

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