Thanks for visiting the Community, aayan-shahid-pk-.
I’ll help and point you in the right direction on how to handle your tax concern. We’ll have to make sure This tax is collected on purchases is turn on.
The impact on your taxes will show once you purchase an item from your suppliers. If you wish to withhold a different one, you’ll have to add a service item.
Here’s an article that provides more insights into this process: Set up tax. It includes some links about creating a custom tax rate and a tax agency.
You can also read through this write-up about the Sales Tax feature: Set up and use tax in QuickBooks Online. It provides detailed information on how QuickBooks Online (QBO) calculates tax, input tax categories, and other tax-related activities.
Feel free to post a comment below if you have other tax concerns. I’ll get back to make sure you’re taken care of. Have a great rest of the day.
Thankyou for your reply,
But my question still exist that how can i withhold the tax on purchases e.g the double entry is
Dr. ABC professional expense 100
Cr. ABC payable 90
Cr. Income tax payable 10
so when i pay the vendor it should be paid at 90 but the expense should be booked by complete 100 in the expense head.
The method you have narrated acts as an additional tax appearing on the purchase receipt thus increasing the total expense.
I hope you get my point.
I'll make sure to help you today, @aayan-shahid-pk-.
To calculate the tax together with the total expense amount, you'd need to make sure they're tagged as Exclusive of Tax.
Please feel free to read these handy articles for your reference:
After that, you'll learn more about billable expenses and how to manage expenses.
You can always leave a comment below if you have further questions. I'm always here to help. Take care!
I think their is a communication gap...let me rephrase my question.
In my region we have to withhold a portion of tax while making the payment to the vendor, and the tax is then submitted to the authorities. so this concepts occurs with the vendors and it has nothing to do with the sales or customers. The withholding concept solely relates to the SUPPLIERS/VENDORS.
So as you mentioned earlier the Tax rate in the expense column will increase the total payable amount e.g
payment to vendor 100 plus 10 tax = 110 payment.
Instead what i want is the payment to vendor will be 90 and the 10 will e routed to tax payable and a complete 100 will be booked as a expense.
Dr. Expense 100
Cr. Vendor payable 90
Cr. Tax payable to Authority 10
so lemme know is there any option available to withhold the tax upon the payment to vendor.
Thanks for sharing some more information about your expense concern, @aayan-shahid-pk-,
Allow me to share some insights about handling this process in QuickBooks Online. At the moment, there isn't a way to automatically withheld other tax for expenses besides GST.
If you need to add another amount to the expense, you can create a service item for the tax and map it to a current liability account. See the following screenshots to illustrate the process.
Add a new liability account to your chart of accounts
Add a new product or service item:
Then you can use this item on your expense in the format I will share below. I'm also adding the transaction journal, so you can see how it works.
Another option is using a journal entry posted to the liability holding account. We recommend consulting with an accounting professional for this. This way they provide proper advice on how to handle your accounting and help you record taxes withheld.
Update this thread if you have more questions about recording transactions or taxes in QBO. I'll be more than happy to help any time. Have a nice day!