I know your post is old and marked as "solved", but I just wanted to let you know that someone understands the issue and agrees with you!  I am having a similar issue.  I am seeing Credit Memos showing up on the Sales Tax Liability Report as negative values; if I zoom on a transaction, it shows the Original Amount & Paid Amount as both negative.  This has the effect of lowering the "sales" amount (we also do sales tax on a cash basis).  These are generally for invoices that we have "voided".  Our situation is complicated a little further as all invoice transactions are "imported" into QB from our primary job management software; this means we can't follow the steps QB outlines in these situations.  Regardless, I agree that the report is wrong.  If you are reporting sales tax on a cash basis, the original (unpaid) invoice never appears on the report; therefore the credit memo to write it off shouldn't appear either.  The same applies for a partially paid invoice as in your case.  We are fortunate that nearly all of our sales are tax exempt; we do have to report non-taxable sales, but at least it (mostly) doesn't affect actual tax we have to pay.  Just thought you'd like to know that someone does understand what you're trying to say!