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Level 2

which of the various tax codes should i be using at any given point?

I'm very new to bookkeeping. Just joined in the last 2 months. So I apologize for the basic question.
With Canadian companies, when there's no tax mentioned or it's a foreign invoice, how do I enter it in? As one example if they spent $100 on meals in the US and we're charged tax of say $10, how would I enter that into the books? And alternatively, what if a Canadian contractor sent them a bill for $500 but didn't charge tax how would that be entered?
Keep in mind there's various tax options that sound similar to me:
E (0%)
Exempt (0%)
Out of Scope (0%)
Z (0%)
Zero-rated (0%)
My goal here is to have a default tax code in mind to minimize thinking each time.
2 Comments 2
QuickBooks Team

which of the various tax codes should i be using at any given point?

Hello Swordfish,


Welcome back. I can appreciate how figuring out which tax code to use when could be tricky, especially when you're first getting into bookkeeping. I'll steer you in the right direction.


For figuring out which sales tax code to use, an accounting or bookkeeping professional with more experience is your best resource. Since I'm a tech support agent, I'm not able to advise on which codes you should use when, but I can help you get a better sense of what's going on with the program.


For instance, I've noticed that you mention having both a Z and Zero-Rated code as well as an E and Exempt code. The single-letter codes and the long-form ones I've paired them with are effectively the same codes; Z is Zero-rated and E is Exempt. Typically when you have both in your books, it means that there's been a migration of QuickBooks Desktop files into the QuickBooks Online account. The single-letter codes would have come over from Desktop.


I recommend considering making those old Desktop codes inactive. We've been having an increased number of reports of QuickBooks Online not reporting properly when those codes are used. Setting up the codes in QuickBooks Online again is the way to go to ensure that you've got accurate reports and things are calculating properly both on transactions and in the sales tax centre. To make a code inactive, go Taxes > Sales Tax > Manage Sales Tax > click Make inactive on your old codes.


I'm going to leave you with a few articles about sales tax in QuickBooks Online, including an article that gives a bit more information about the various sales tax codes. You can use the second article to set up your codes in QuickBooks Online.

All the best to you.

Level 2

which of the various tax codes should i be using at any given point?

Thanks so much! Should I make all the single letter codes inactive or just Z and E?

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