Calculating tax on bills in quickbooks online

Thank you all for some great questions and responses as they have helped me get this far. I'm hoping for a little more clarification though as far as taxes go when QBO is retrieving data from another web based software program.

The company I work for uses one program for all our business operations however we recently added QBO to switch over our accounting processes, leaving inventory in the original program. Both are web-based. I've set up our Sales Tax area and our Sales Invoices appear to be calculating correctly. Yet when we create an invoice in our old system, my understanding is that we leave tax off of the invoice and when it is retreived by Quickbooks, Quickbooks determines the tax to be paid (so automated sales tax is being calculated for each sales and purchases).  Each supplier expense is showing up 'out of scope' with no taxes applied. 

Can I please clarify, is tax to be applied to expenses BEFORE QBO retrieves the bill?  

Thanks for the clarification, @at_WES.

You’ll want to ensure if the expenses from your other software are tax reclaimable. If so, then the bill should also be taxable in your QuickBooks Online (QBO) account. This way, it’ll not show as out of scope in your QBO account.

I'd also recommend consulting with your accountant or a tax expert for additional guidance in properly recording tax in QBO.

To learn more about taxes in your QBO account, I got you these articles that you can use for reference:

• Applying Sales Tax to Transactions and Sales Forms
• How do I set up sales GST/VAT rates and use them on forms? (International QBO)

Post a reply below if you have other concerns or questions about taxes in your QBO account. I’m more than happy to help you out again. Have a good day ahead.

Hello,

I have QB Online and I do not see the option "This tax is collected on purchases" when setting up sales tax. The only questions the form asks for are:

-Name

-Agency

-Rate

I also have an option for "Single" or "Combined". Neither one opens up the option needed to add sales tax to a purchase. This question has been bugging me for some time now and I have tried the tech support line several times to resolve this. Would you have any other solutions or ideas for me to get sales tax on a PO or a Bill?

Thanks so much,

Dan

Thanks for joining in this thread, @dcaroli. Let's ensure to set your Bills or Expense to inclusive of sales tax so it'll automatically apply when you create a PO or a Bill. 

Here's how: 

1. Go to the Settings (gear icon) at the top right.
2. Select Accounts and Settings, then go to the Advanced tab. 
3. Click into the Accounting section to expand the accounting options.
4. Change the Default tax rate selection to 'Inclusive of Sales tax'
5. Click Save to record the change.

You can also check the specific supplier's details as there is an option to select a default sales tax code for them. If that is selected as Non-tax, then the column would not appear on any transactions to that specific supplier.

I've also added these articles for your future references about Sales GST/VAT in QuickBooks:

• How do I set up sales GST/VAT rates and use them on forms? (International QBO)
• Applying Sales Tax to Transactions and Sales Forms
• Manage a tax rate change

Let me know if you have additional questions about adding sales tax on bills. I'd be happy to get back and help. 

Hey there,

Thanks for the quick reply. I just followed these instructions and I am not seeing these options either. In the accounting section under advanced - account and settings, I only show the following:

-First month of fiscal year

-First month of income tax year

-Accounting method

-Close the books

No option regarding taxes shows up for me. I know there has to be a way to do this. Adding taxes to a purchase is pretty basic for accounting. Thanks for your continued support, it is much appreciated. 

Just a little more information in case it helps you to help me. I have a column in my "bill form" that says "TAX" and it has a check box in each line. The strange part is that nothing changes when I have those boxes checked or unchecked. The total remains the exact same. 

Thank you for following up with us here on the Community page, @dcaroli.

I've read your original post, and I'm stepping in for a moment to share with you some insights about setting up taxes for expense transactions.

Usually, the option to set a tax for purchases and to set the default tax rate selection from the Accounts and Settings is available for QuickBooks Online (QBO) International. If you're subscribed to any of the international versions of QuickBooks, please make sure to select the desired code so bills will compute the accurate taxe/s.

1. Select Bills from the (+) New icon.
2. Input the details, then select the correct tax rate under the Tax column.

If you had the US version of QuickBooks, you only have the option to set up taxes for your sales transactions and not with purchases. As a workaround, you can either create an expense account or a service/non-inventory item and add it to your bills for the amount of taxes.

Here's how to add an account from your chart of accounts:

1. Go to the Gear icon, then select Chart of Accounts.
2. Select New to create a new account.
3. In the Account Type dropdown, choose an account type (Expense).
4. In the Detail Type dropdown, select the detail type that best fits the transactions you want to track. 
5. Enter the account's name, and fill in the necessary information.
6. When you're done, select Save and Close.

And, here's how you can add a service item to QuickBooks Online.

To know more about setting up taxes for QBO US and International, I recommend opening these links:

• Sales tax in QuickBooks Online US
• How do I set up sales GST/VAT rates and use them on forms? (International QBO)

I'm also adding these screenshots for your visual references.

Please let me know how else I can help you with recording your transactions and taxes. I'm more than happy to help. Have a good one!

Thank you so much for your assistance! This has been driving me crazy for months now, and I have been unable to get a straight answer such as yours.

Would you happen to know if QB Enterprise for manufacturing would have the option?

Thanks for coming back, @dcaroli. That explains why the options we mentioned aren't available because the steps provided were intended for QuickBooks Online. 

After further research, I found out that QuickBooks Enterprise isn’t designed to track sales tax automatically on non-sales transactions. You need to manually track it on bills, checks, and purchase orders.

For more insights, check out this article: Track sales tax on purchases from vendors.

Let me know if you have additional questions. I;ll be here toe help you more. 

Thanks for the reply... I am stock my QBO doesn't show:

1. "Place a checkmark for This tax is collected on purchases option."

Hello, @SteveRay01.

I can share a few steps about your scenario. After placing a checkmark for This tax is collected on purchases option, the next step would be to enter the rate in the Purchase rate field if required. Then place a checkmark for Purchase tax is reclaimable option if it is required. Then click Next to finish the setup.

Then click OK.

You can also follow the steps through this video on how to track sales tax: Tracking sales tax.

I've also added these articles for your future references about Sales GST/VAT in QuickBooks:

• How do I set up sales GST/VAT rates and use them on forms? (International QBO)
• Applying Sales Tax to Transactions and Sales Forms
• Manage a tax rate change

Let me know if you have additional questions about adding sales tax on bills. I'm always here to help you hand in hand. 

I am sincerely grateful for your assistance - you have truly been a lifesaver. For the past two days, I have been in a state of distress, trying to figure out what went wrong and why I couldn't view the tax rates column on my bills and expenses transactions. However, after carefully examining your detailed screenshots and following your guidance, all my anxieties and struggles with the tax agency have dissipated. I was able to confidently deactivate all the incorrect tax codes associated with the previous agency and set up a new one, incorporating the necessary tax rates for both purchases and expenses seamlessly. Your clear instructions and visual aids have been invaluable in helping me rectify this issue efficiently.

Regards, Mary

Thank you for joining the Community Space, @MaryCy. 

We're glad to hear that my previous colleague's response was able to help you. We plan to assist you more here in the Community. 

Please don't hesitate to let us know if you have further QuickBooks-related concerns. Keep safe.