Do More with Sales Tax in QuickBooks Online

In QuickBooks Online, we like to go above and beyond for our customers (sales tax included). Last week I posted an article about the basic setup for sales tax in your account, but this time we’re getting into some extras you may need! 

As I mentioned in the last article, sales tax varies from state to state. To accommodate this, flexibility is important to us. If you sell to different states or need to add a certain local tax, you can add custom rates to your forms to reflect any of those changes.

1. Go to Taxes on the left menu, then Sales tax.
2. Select Sales tax settings.
3. In the Custom rates section, select Add rate.
4. Choose Single rate.
5. Enter the Name of the custom rate.
6. Select the Agency you file payments to. 
7. Enter the Rate, then Save.

It’s good to add specific information about the type of tax within the name. You can mention the name of the state, county, or city where that tax type applies. Ex: Boise Sales Tax, or CA Tax on Cigarettes. 

You can also find this custom rate window within each sales receipt, invoice, etc by clicking on the drop-down arrow where it says Based on location>>Add Rate.

In this same window above, there’s an option to create a combined tax rate. This groups two or more individual tax rates into one charge. This simplifies this process so you don’t have to select each rate for a new sale. You’ll only select one combined rate and add it to your form. When you run your report (described later in this article) each rate is still tracked separately. 

Easy, right? You’ve set up sales tax, you have your custom rates, now what? The Sales Tax Liability report is our next stop; it gives you a summary of your taxable and non-taxable sales, plus the total sales tax you collected from customers. Here's how to run the report:

1. Go to Reports on the left menu.
2. In the Find report by name field, search for "Sales Tax Liability report" and click on it.
3. Select the Report period drop-down. Choose the correct date range depending on how often you file your tax.
4. Click the Tax Agency drop-down. Then, select All or choose just one tax agency.
5. Select Run report.

In this report, you can view the total tax amounts you collected from your customers. This includes totals for state rate and local tax rates (such as city, county, and/or district).

To get an even closer look at what you owe, click on any tax amount. A transaction report opens that shows how much tax you charged in each sale, and also gives you other information like customers, transaction dates, and tax rate. You can even click on the actual transaction type to open up that invoice or sales receipt. 

Keep in mind that your accounting method matters in your report. Depending on whether you are using the cash or accrual method, your "sales" are defined differently. To put it simply, choose Cash to include only money you’ve paid or received. Choose Accrual to include open invoices and bills too. 

Not sure? Always feel free to reach out to your accountant for clarity.

How about that? Now you have even more tricks in your bag so you have got a full 360 view of sales tax in QuickBooks Online. The more you know, the more your business can grow!