Sales Taxes in P&L

Thank you, obviously I am not a CPA. I was looking at sales tax as a cost of doing business but I can see it as a current liability as well.

Sales Tax is a liability until paid. Then it goes through the P&L.

this is true so how do I make it show on my P&L

Thank you for joining the thread, @htb.

Allow me to step in for a moment and share with you additional insights about taxes and the Profit and Loss report.

The Profit and Loss report displays your income, expenses, and net profit or loss over a specific period. Sales taxes on the other hand is a liability, and it doesn't show up on the said report. 

For the time being, you can check out your tax liabilities by opening the Balance Sheet. Once the tax payment is processed, then open the Profit and Loss. To open the report:

1. Select Company & Financial from the Reports tab.
2. Then choose either Profit & Loss or Balance Sheet.

If you need additional tips while working with reports in QuickBooks Desktop, you can open this article: Understand reports.

You can as well open this article to learn more about sales taxes and how to troubleshoot issues or unexpected results you may encounter while managing your sales tax in QuickBooks Desktop.

If you have other questions for us, please feel free to leave a comment below. I've got your back and am always happy to help. Thanks for coming, wishing you and your business all the best.

Sales tax is in the income so why wouldn't it be an expense when you pay it. I understand the liability part

Sales tax is included in income so why wouldn't it be an expense when its paid. I understand the liability part

Thanks for joining on this thread, @kupcake999.

I'll share some information about sales tax in QuickBooks Desktop. 

Sales tax depends on the account type you use and its scenarios. Since the business is collecting sales tax on behalf of tax authorities, the tax is not recorded as a part of the revenue.

For example: 

You sell a bouquet worth $100 and has a 10% sales tax. With this, you need to separate the tax from the gross amount. You will debit for $110, then credit sales for $100, and sales tax payable for $10. 

Sales Tax = Total Sales x Sales Tax Rate
Sales Tax: 100 x 10/100 = $10

Once the sales tax is collected from the customers, it becomes a liability for the business. The Sales Tax Payable is a liability account in the balance sheet that keeps track of the sales tax collected from the customers on behalf of the governing tax authority.

The business holds these funds and is liable for remitting them to the government on a timely basis.

I'd also suggest visiting this conversation and check IamjuViel answer for more example: Different scenarios involving sales tax. 

I'd recommend consulting an accountant so they can explain this to you deeply about this matter. 
 

Additionally, I've added an article about handling sales tax transactions and how QBO calculates the amount: Set up sales tax in QuickBooks Desktop.

Let me know if you have other questions about sales tax. I'm always here to explain further. 

Hi, I believe I am able to follow most of what was discussed below, but I am still confused on how to get a correct P&L using quickbooks. I am not using quickbooks for invoicing, pulled all my income and expenses from the various accounts into quick books, categorized each of them and now I have the correct sales, COGS and expenses on the P&L, BUT because the sales incl. sales tax and I can't figure out how to tell Quickbooks to exclude those. Do I just manually adjust my sales transactions? I was hoping that either Quickbooks can use the 6.7% sales tax and automatically deduct that or I can manually enter a sales tax transaction for my sales (small company). Thanks for you help!

Thanks for joining this thread and sharing detailed information about your Sales Taxes in P&L concern, @hdaalder.

You can create a sales tax adjustment to exclude those sales taxes. When it comes to deciding which account to adjust and how to enter the tax payment, I'd recommend consulting an accountant. They can help and guide you about this. This way, we can ensure that your books are accurate at the end of the month or year. 

To create an adjustment: 

1. Go to the Vendors menu, then hover on Sales Tax.
2. Choose Adjust Sales Tax Due. 
3. Set the Adjustment Date to today.
4. Select the vendor and the adjustment account.
5. Choose the adjustment calculation then enter the check amount. 
6. Add a memo, then hit OK.

If you need more help with adjusting your sales taxes, you can check this article for references: Process sales tax adjustment.

Additionally, I've added these articles below on how to customize reports and troubleshoot sales tax issues in QuickBooks. 

• How to resolve common sales tax issues
• Create, access, and modify memorized reports

Don't hesitate to drop a comment below if you have other questions. I'm always happy to help. Take care, @hdaalder.

Thank you for your reply, but I do not have a Sales Tax in the 'Vendor' menu. Looks like what is populated are my 'Vendors' excl. my distributors.

Thank you for getting back to us, @hdaalder. 

I’m going to walk you through the details of setting up the sales tax.

Before you set up your sales tax items/groups, please make sure to check the tax rates and requirements with your tax agency.

Then, enable the Sales Tax feature by following these steps: 

1. Go to the Edit > Preferences.
2. Click Sales Tax on the left panel, then go to the Company Preferences tab.
3. Select Yes to turn on sales tax.
4. Set up the sales tax items or sales tax groups for each county, district, city, etc. where you collect sales tax. Click Add sales tax item to do this.

After the steps, add your sales tax item or tax group. The steps are included in this article: Set up sales tax in QuickBooks Desktop.

Once your done collecting the sales tax and reviewing the tax reports, please check out this link to guide you how to process the payment: Pay sales tax.

If you have additional questions regarding the process or need help with other concerns, please let me know in the comments below. I'll be around to help you out again. Take care and stay safe.

Thank you for responding, but I don't believe this is what I am looking for. The issue is:

1) my Sales transactions were pulled in from Venmo and are for the total amount (Incl. Tax)

2) these amounts are pulled in by quick books in the P&L as Sales/Income and should Excl. Tax

In the meantime I manually changed the Sales amounts to exclude the Tax which I didn't want to do, because now I am out of sync with what was pulled in from my bank, but need a correct P&L for my Tax returns and deadline is coming up.

Would appreciate a solution in Quickbooks on how the 6.7% tax can get excluded from the sales on the P&L.

Thanks for getting back on this thread, hdaalder. I know it can be challenging when you can't exclude the sales tax on the Profit & Loss report. I'm here to make sure this gets taken care of.

QuickBooks Desktop will only base on the transactions you've imported. Since you're not using the program for invoicing, I'd recommend contacting the Venmo Support Team. They'll be able to help you manage and prepare the data for the incoming tax returns.

Additionally, I've included an article that'll help you get different perspectives of how your business is doing. This ensures your books are always accurate: Customize Company and Financial Reports.

I'm only a post away if you need more help in completing your other tasks in QuickBooks, hdaalder. It's always my pleasure to help you out again.