Transactions that are Exempt from VAT will normally show in the VAT Payable when running a Balance Sheet report, Nleric.

In QuickBooks Online, when you create a transaction such as an invoice and select Exempt from the VAT rates, this transaction will appear in the VAT Payable section with zero amount when generating a Balance Sheet report. This behavior is by design and cannot be modified, as it aligns with the software's intended functionality.

If you prefer not to see these transactions, you can run a VAT Liability report. This report will separate the VAT-exempt transactions from those that have VAT rates. Additionally, you can click on each group with different VAT rates to display the transactions, keeping the VAT-exempt transactions hidden.

Here's how:

1. Go to Reports, then click Standard reports.
   
2. Enter VAT Liability Report on the search bar.
   
3. The report will show you the different VAT rates, including the Exempt Sales (VAT-exempt transactions).
   
4. Select a VAT rate to view all transactions with that rate.
    

Moreover, you can refer to this article for detailed information on how QuickBooks calculates VAT: Learn how QuickBooks calculates VAT.

Additionally, you can assign VAT categories to your products and services to enhance financial accuracy and simplify the tracking of taxable and non-taxable sales.

If you have any further questions regarding VAT-exempt transactions in your reports, please post a reply. We are here and ready to assist you.