The sales tax liability account accrues for all my sales, even on the invoices where I ship out of state and no tax is collected. How do I fix this?

You can check the item taxability of those invoices to ensure they are correctly marked as taxable or not, @christine4form. I'll elaborate on this in detail below.

Invoices in QuickBooks Online (QBO) are taxed depending on the tax rate you've selected. However, even if your California (CA) sales tax is inactive, the system will still calculate taxes based on your business address if it is listed in CA.

You can reopen those invoices and modify the tax settings. If no tax was collected for an invoice, you can uncheck the Tax column for that line item. Here's how:

1. Go to the Sales menu and choose Invoices.
2. From the Invoice page, locate the transaction and select Edit Invoice.
3. Update the Tax column. Untick the box if it's not taxable.
4. Click Save and Close to save the changes.

To learn more about applying your sales tax to your transactions in QBO, check this reference: Apply sales tax rates to transactions and sales forms in QuickBooks Online.

On top of that, you can manage your sales tax payments by recording, adjusting, and deleting transactions in your sales tax center.

Moreover, we have QuickBooks Live Expert Assisted that are always available to help you with best practices in setting up and making the most out of QuickBooks Online.

If you have any other questions about sales taxes or QBO-related concerns, please let me know by adding a comment below. We're here to help you in any way we can.

Thank you! But if I go to my Account settings, my address is correct - NY. Is there somewhere else it would be pulling up CA?

Thank you for the confirmation about your business address, christine4form. Let me explain the specifics of what taxes fall under California (CA) when generating a Sales tax Liability report.

The taxes showing under California (CA) state when pulling up a Sales Liability report are those past transactions that had taxes before the CA tax agency was deactivated. To verify this, kindly click the amount on the Sales tax Liability report to display those taxed invoices under the CA agency.

Also, when creating an invoice, it’s important to pay attention to the Tax box in your line items. If you prefer that the items on your invoice are not subject to tax, ensure to uncheck the Tax box before finalizing the invoice.

For detailed information about managing your sales tax, feel free to check this article: Set up your sales tax in QuickBooks Online.

Additionally, I've added these articles you can use for setting up and processing sales tax adjustments:

• Create or delete a sales tax adjustment in QuickBooks Online
• Process sales tax adjustment

Don't hesitate to leave a reply in this thread if you need help managing your sales taxes in QuickBooks. The Community is available to lend a helping hand.