If you run a business that sells goods or services, you may need to collect and pay sales tax to your local tax authorities. Sales tax is a percentage of the price of the goods or services that you charge to your customers. In this blog post, we will show you how to manage sales tax payments in QuickBooks Online.
Set Up Automated Sales Tax in QuickBooks Online
To use the sales tax feature, you need to turn it on in the settings and enter some basic information about your business, such as your tax agency, filing frequency, and start date.
- QuickBooks calculates the total sales tax for each transaction based on three factors:
- the tax exemption status of your customer,
- the locations where you sell and ship your products or services,
- the sales tax category of your product or service.
In other words, it takes into account who you’re selling to, where you’re selling and shipping to, and what kind of product or service you’re providing. This ensures that the correct amount of sales tax is applied to each sale. In some states sellers are required to charge tax depending on their business location, but QuickBooks should be able to handle this situation as well.
- QuickBooks Online is a tool that helps you manage sales tax in accordance with your state’s tax laws. It can also handle sales tax for transactions outside your state by allowing you to add other tax agencies. There are two methods to configure the locations where you collect sales tax:
- if you’re new to QuickBooks, you can set up the locations where you charge sales tax for the first time,
- if you’re currently using manual sales tax, you can check if it’s possible to switch to the new automated sales tax system.
- When you are ready, you have the option to set up sales tax categories for the items you sell. This feature in QuickBooks helps determine the appropriate amount of sales tax to apply based on the nature of the item or the location of the sale.
- If you’re delivering goods or providing services at your customer’s location, the tax rates might vary. Some customers, such as churches, schools, and non-profit organizations, may not need to pay sales tax. It’s important to keep accurate records of your customers’ tax status, billing address, and delivery address. You can verify this information in QuickBooks.
Sales Tax Feature
First, review your taxes in detail to understand what you owe and why. This ensures everything is correct before you submit and pay your sales tax return.
Once you have set up the sales tax feature, you can start recording sales tax on your invoices and receipts. QuickBooks Online will automatically apply the correct sales tax rate to each transaction, based on the information you entered in the settings, in the costumer details and the details of the transaction. You can also adjust the sales tax amount manually if needed.
To pay your sales tax to your tax agency, you need to file a sales tax return in QuickBooks Online. This is a summary of your sales tax activity for a specific period, such as a month or a quarter. You can view your sales tax return in the Sales Tax Center, which shows you how much sales tax you have collected, how much you owe, and when your next payment is due. You can also see a breakdown of your sales tax by jurisdiction, product category, and customer.
To file your sales tax return, you need to review the information in the Sales Tax Center and make sure it matches your records. You can also make any adjustments or corrections if needed.
By using QuickBooks Online to manage your sales tax payments, you can save time and avoid errors. QuickBooks Online will do the math for you and keep track of your sales tax obligations. You can also access your sales tax data anytime, anywhere, from any device.
We hope this blog helped you to understand how this feature works.
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This material is for informational purposes only. It does not constitute tax, legal or accounting advice.